Ii macro brief AI in europe part two comparing capex and strategy

Macro brief: AI in Europe Part 2– Comparing capex and strategy

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Macro brief: AI in Europe Part 2 – Comparing capex and strategy

Key takeaways • While estimates of AI spending across regions are hard to find, every available measure shows the scale of investment in Europe is an order of magnitude smaller than in the US and China. • That said, Europe is substantially exposed to AI spending and Beth Beckett will share in gains and losses from the capex boom, even when Economist the physical infrastructure is built elsewhere. • Europe’s current strategy focus is not to compete with the US and China on capex levels, but to accelerate adoption.

With ongoing debate about whether the US or China will win the AI race, where does Europe fit into this developing mosaic?

Tryggvi Gudmundsson Economist Europe is spending less on AI… The unsurprising bottom line is that Europe is investing much less in AI than either the US or China. While comparable estimates of AI spending across regions are hard to find, every available measure shows the scale of investment in Europe is an order of magnitude smaller than in the leading AI economies. If AI leadership is measured in dollars spent (which is a very big if), Europe is clearly lagging behind. To take one well-known example, AI-related capex in the US is likely to exceed 2% of GDP this year, while the equivalent figure for the EU remains a small fraction of that. On AI infrastructure, one estimate has the US accounting for roughly three quarters of the global aggregate, with China a distant second and Europe well behind both.

A broader measure of digital investment tells a similar story. For decades, the US has consistently invested more heavily in information technology than Europe, and AI appears to be reinforcing rather than reversing that pattern. Very simply, AI investment is highly concentrated in a small number of firms, and most of those are located outside Europe.

Digital investment proxy for the euro area and the United States

Estimates are for illustrative purposes only. Sources: Eurostat, US Bureau of Economic Analysis, European central Bank (ECB), and ECB staff calculations (index: 2014=100). The blue dot extends to 2025 on the basis of the annual growth of the digital services output proxy. The proxy for the United States combines investment in data centres, information processing equipment and computer software. The latest observations are for the fourth quarter of 2025 for US data, December 2025 for digital services production data and 2024 for other data.

In a previous paper on AI in Europe, we outlined reasons for historically lower levels of IT investment, including sector composition and management practices. But two additional bottlenecks are slowing the AI buildout: higher energy prices compared with the US, which makes investment in power-hungry data centres less attractive, and an aging electricity grid that lacks the capacity to connect them. In the UK, new data centre projects wait just under three years to be connected, versus two years in the US (and three and a half in Germany). That means the direct growth impulse from constructing data centres, training models and purchasing advanced computing equipment is, and will remain, much larger in the US than in Europe.

… but is still exposed to AI investment, for better or worse Nonetheless, Europe is substantially exposed to AI spending and will share in gains and losses from the capex boom, even when the physical infrastructure is built elsewhere. One important channel runs through European ownership of US securities. European households and institutions increasingly finance the AI build-out indirectly through their purchases of US technology stocks. Capital gains on euro area holdings of US equities were estimated at 1.3% of GDP last year as markets boomed. A significant drawdown would lead to losses and wealth effects weighing somewhat on consumption within Europe. Another area where Europe is a key player is the semiconductor supply chain, where EU firms are deeply embedded in the production process that makes AI