Unprompted: Europe’s AI Disaster Is a Warning for the Rest of the World

Unprompted is an occasional opinion column from Kunal Gupta for Pivot 5 readers.

Europe’s AI Disaster Is a Warning for the Rest of the World

Europe is throwing an AI summit while the rest of the world is throwing AI into production.

The Paris AI Summit is happening this week. Tech leaders, policymakers, and regulators are discussing “Europe’s AI strategy.” But here’s the truth: Europe doesn’t have an AI strategy—it has an AI handicap.

While the U.S. and China are building AI at breakneck speed, Europe is regulating itself out of the race.

I’ve been mostly based in Portugal for the past few years, watching this play out firsthand across Europe. The education, talent and desire is here. But AI isn’t just about intelligence—it’s about access. And access is exactly where Europe is losing.

Europe’s GDP growth has been shrinking for years, while the U.S. and China power ahead. AI is the biggest economic shift of this generation, but instead of competing to lead it, Europe is doubling down on restrictions, bureaucracy, and barriers to entry.

The rest of the world should take note. This is what happens when governments prioritize control over competition.

Europe Is Months Behind—And Months Matter

Europe’s stance on regulation nudges AI innovators to wait to give Europeans access to the latest and greatest technology.

Google’s AI Overviews launched in the U.S. in May 2024 but didn’t reach France and Germany until October 2024—five months behind.

Anthropic’s Claude AI was available in the U.S. in March 2023 but only arrived in Europe in May 2024—fourteen months behind.

Every month Europe falls behind in AI is a year of catch-up it may never recover.

In the global race to AI, the U.S. is fighting to control AI dominance by restricting NVIDIA high-end chip exports to China, keeping the most powerful hardware for itself.

While Europe is fighting to limit imports into the continent—blocking its own access to AI models through excessive regulation. One country is hoarding power, the other is turning it away voluntarily.

Even OpenAI’s Sam Altman is saying the quiet part out loud: “I would generally expect new products to have delayed launches in Europe, and that there may be some we just can’t offer.”

The U.S. and China are building AI champions. Europe is building AI regulators.

The world’s biggest AI breakthroughs are being built in Silicon Valley and Beijing. In Brussels, they’re being written into rulebooks.

Capital Precedes Innovation—And Europe Has None

The single best predictor of where breakthrough technology will emerge is where the capital is flowing. AI requires deep investment in compute, data, and talent.

Last year, U.S. AI startups raised $97 billion.

Europe? Just $8 billion.

That’s not just a funding gap—that’s Europe signaling to the world that it isn’t serious about AI.

Right now, investors aren’t betting on European AI. And without investment, there’s no innovation. Without innovation, there’s no industry. Without an industry, Europe is just a consumer of foreign AI, not a creator of it.

5 Ways to Fix Europe’s AI Strategy

If Europe actually wants to compete in AI, it needs to stop regulating and start building. Here’s what I would do differently:

1. Abandon the AI Act—for Startups and Open-Source Models

Regulation benefits large incumbents who can afford legal teams and compliance departments. It kills startups before they even start. For the next five years, the EU should exempt startups and open-source models from the AI Act. Let them build first, then regulate.

2. Build a Public AI Supercomputer—Free for Startups

If you don’t have compute, you don’t have AI. The U.S. has NVIDIA, OpenAI, Google—Europe has nothing. The EU should build a public AI supercomputer and make it free for startups, research labs, and universities.

3. Launch a €1B ‘Sovereign AI Fund’—and Deploy It Fast

Stop announcing funds that never materialize. Deploy €1 billion this year. No bureaucratic delays, no five-year rollout plans—just direct investment into AI startups now.

4. Give AI Startups a 10-Year Tax Holiday

AI companies are not traditional businesses. For the next 10 years, AI startups should pay zero corporate tax—as long as they reinvest in R&D, hiring, or scaling.

5. Cut AI Regulation by 90% for a 10-Year Innovation Window

The U.S. and China are innovating first, regulating later. Europe is regulating first, then wondering why nothing is being built. The EU should suspend 90% of AI regulations for 10 years and let AI actually develop before restricting it.

Europe Needs Global Tech Giants—Or It Will Fade Into Irrelevance

Look at the biggest global tech companies today, none of them are European.

Now think 10 to 20 years ahead. If Europe doesn’t change course right now, this won’t just be a lost decade for AI—it will be a lost century for European technology.

Every world-changing tech wave is built on top of mega-companies. Europe has none today. At this rate, it won’t have any tomorrow.

AI won’t just determine who dominates tech—it will decide who dominates the global economy.

The World Should Learn from Europe’s Mistakes

Europe isn’t losing AI because it lacks talent—it’s losing because it refuses to get out of its own way.

AI dominance will be determined by one thing: who moves first.

The U.S. and China are investing.

Europe is still debating.

That’s why it’s already losing.

Unprompted is an occasional opinion column from Kunal Gupta for Pivot 5 readers. Follow Kunal on LinkedIn or X.