Europe’s Digital Technology Industry Is Growing — but the Investment Gap With the US Remains Huge
Europe’s digital technology sector continues to expand, yet the investment gap with the United States remains wide and, in key areas, is still widening. The region is producing more funded companies, more research and more specialised talent, but scale and capital intensity continue to favour the US.
European tech spending is projected to grow solidly—Forrester forecasts 6.3% growth in 2026 to exceed €1.5 trillion—driven by AI-optimised hardware, cloud, cybersecurity and software. The number of funded tech companies has risen from roughly 13,000 a decade ago to more than 40,000. Digital investment in the euro area has expanded by around 60% since 2014. Yet a comparable US measure more than doubled over the same period, accelerated by heavy data-centre and AI infrastructure spending.
Business investment tells a similar story. US corporate spending on equipment and facilities is expected to rise roughly 40% by the end of 2027 compared with 2021 levels, largely because of AI-related outlays. European spending is projected to increase by only about 12% over the same window. In software alone, US investment exceeded €350 billion in 2024 against roughly €110 billion in the EU.
The gap is most visible in frontier AI and compute. The US hosts the bulk of large-scale training clusters and attracts the majority of global AI venture funding. Europe’s planned AI “gigafactories” represent a serious policy response, but they remain smaller than the capacity already controlled by leading American firms. Electricity costs in parts of Europe are also higher, and planning timelines longer, which further constrains rapid infrastructure build-out.
Policymakers are responding with initiatives such as the Tech Sovereignty Package, Chips Act 2.0, Cloud and AI Development Act, and substantial public funding for AI compute hubs. These measures aim to close the gap in strategic capabilities. Whether they can match the speed and scale of private US capital remains an open question.
Europe’s digital industry is undeniably larger and more sophisticated than it was ten years ago. Closing the investment gap, however, will require sustained increases in both private risk capital and public co-investment if the region is to compete at the frontier rather than merely participate.
