Europe's position in the global artificial intelligence (AI) race is increasingly precarious due to significant disparities in investment and structural energy market challenges, experts say. Despite efforts by the European Union to boost AI infrastructure, the continent faces hurdles that threaten its competitiveness in this critical sector.
In July, the European Commission announced plans to develop seven major AI computing hubs across the EU. Eighteen member states have submitted bids to host at least one of these facilities, collectively committing around €3 billion ($3.5 billion) in future computing acquisitions. However, this figure pales in comparison to the spending projected by six predominantly U.S.-based hyperscale technology companies, which are expected to invest more than $1.3 trillion by 2027, according to data from S&P Global Ratings.
The discrepancy in investment underscores the broader challenge for Europe, analysts note, particularly insufficient integration within the bloc’s energy market. The current energy transmission system is fragmented, impeding the efficient transfer of electricity from regions with surplus generation to areas experiencing rising industrial demand. Weak interconnection infrastructure, uneven transmission fees, and complex regulatory approvals have prevented the creation of a truly unified energy market across the EU.
This fragmentation translates into higher electricity costs that disproportionately affect energy-intensive industries. Estimates from the International Energy Agency indicate that in 2025, industrial users in the EU paid an average of approximately $107 per megawatt-hour for electricity—more than double the U.S. rate and about 57% higher than prices in China. Such elevated costs have contributed to subdued industrial output growth; overall production in Europe increased by only about 1% from 2021 to 2025, based on Eurostat data analyzed by Marius Köppen, a senior analyst at the Center for the Study of Democracy.
More worrisome declines were observed in key sectors: chemicals manufacturing dropped by 19%, while production of basic iron and steel, cement, and aluminum decreased by 16%, 14%, and 11%, respectively. While multiple factors have influenced these declines—including weaker global demand, relocation of manufacturing facilities to the U.S. and China, and intensified competition from Asian companies—high energy costs remain a significant burden.
Unlike many other parts of the European economy that have rebounded from the COVID-19 pandemic and energy disruptions following Russia’s invasion of Ukraine, the continent’s energy-intensive industrial base continues to struggle. Recent spikes in energy prices linked to escalating tensions between the U.S. and Iran add further uncertainty.
As Europe seeks to secure a foothold in the emerging AI-driven industrial revolution, experts emphasize the vital importance of establishing reliable and affordable energy supplies. Without addressing the structural weaknesses of its energy market and narrowing the investment gap, the EU risks falling further behind in a rapidly evolving global landscape.