The United States and China have been investing large amounts of capital in artificial intelligence (AI) for years, with many of the resulting applications being in the military domain. The structural and continuous nature of both civilian and military investments in AI and related innovations creates economies of scale and scope that ripple across many sectors of the economy. Moreover, intelligent technologies in the military sector allow for more power within one’s own bloc of friendly nations and increased deterrence against potentially hostile countries, to put it in Carl Schmitt’s terms.
Meanwhile, Europe continues to shoot itself in the foot with excessive regulation. But regulating what, exactly? Even proponents of regulation agree that in order to regulate a market, the market must first be allowed to develop “freely”. Yet, in Europe the AI market is still in its infancy. Out of US$35 billion invested globally in AI startups during the first half of 2024, Europe’s share was a mere 6 percent. Furthermore, when it comes to AI infrastructure, Europe lags far behind American tech giants. Thus, the AI landscape in Europe is, in many ways, incomplete. Without major European tech platforms to drive innovation, EU AI startups are forced to rely on American companies for critical infrastructure. The same is true in cloud computing: Europe is significantly behind the U.S. in this area, so that the Old Continent is unable to host the development of advanced generative AI models.
The Others
The American potential in AI is enormous. This is due to a combination of giant tech companies such as Google, Microsoft, Amazon, Meta, Apple, Tesla, Nvidia, and Intel, to name just a few, and a venture capital and entrepreneurial finance ecosystem that is the most developed in the world. Moreover, the U.S. government, through the National AI Initiative Act of 2020, has set the goal of global leadership in AI, fostering cooperation among government agencies, universities and the private sector.
Corporate America is investing massively in AI research, development, and commercialization. These investments are taking place both internally within tech giants and externally through acquisitions of AI startups. There are many examples. One is ChatGPT. Another one is Google’s DeepMind, one of the world’s leading AI research labs, which has developed groundbreaking applications in deep learning, natural language processing (NLP), and reinforcement learning.
Think also of Elon Musk. Despite his rather eccentric personality and questionable public statements, he has undeniably pushed the technological frontier to its current limits. The examples are numerous, but a few stand out: Tesla’s Autopilot system, Neuralink, the pioneering company working on implantable brain-computer interfaces, and Starlink, a wholly owned subsidiary of SpaceX that provides satellite coverage to over 100 countries.
All these corporate innovations represent a massive competitive advantage for the United States. This advantage translates into both market share and profits in sectors that will be key in the next future — such as using AI for drug development, which Google is overseeing through Isomorphic Labs — and for military deterrence. On the latter point, consider the possibility of using AI and related innovations for warfare, or even the potential future use of SpaceX for military purposes, with platforms that could allow to reach China in 30 minutes.
China is also a major player. Despite a more state-driven approach, it has developed major global players in AI and innovation, such as Baidu, the so-called “Chinese Google,” Alibaba, Huawei, and Xiaomi.
Europe
Europe has fallen behind because of its massive bureaucracy and a chronic tendency to regulate everything. An overly bureaucratic and regulated business environment poses a threat to the success and productivity of companies. Entrepreneurs must spend much of their valuable time trying to understand and interpret constantly changing regulations set by supranational institutions. At the national level, with a few exceptions, many laws overlap across institutional levels, such as the central government, regions, provinces, and municipalities. This is a nightmare for European entrepreneurs, who do not want to waste time on unnecessary bureaucracy that recalls the centralized planning of the Soviet era.
The most significant current example is undoubtedly Europe’s over-regulation of the digital economy. AI, other intelligent technologies, and, more broadly, digital technologies are evolving at an extremely fast pace and are transforming the balance of power between global economies. While this phenomenon is being leveraged primarily by the U.S. and China, Europe is trying to regulate it. According to the 2024 AI Index Report from Stanford University, the combined AI investments of the UK, Germany, Sweden, and France amounted to 8.7 billion euros in 2023, compared to 62.5 billion euros in the U.S.. Instead of seeking to cooperate – including in military areas, given the worrisome geopolitical landscape Europe has to face in next years – Europe has focused on producing several measures such as the Digital Markets Act, the Data Act, and the AI Act, among others. These measures, particularly the AI Act, do not help businesses. Rather, they slow down the adoption, development, and commercialization of emerging digital technologies, with a cascading negative impact on innovation and European competitiveness.
Rather than opposing American companies over supposed issues related to data management and storage, Europe should take a page from America’s playbook and learn from its ability to generate giant corporations in strategic sectors.
Photo by Wesley Tingey
