Europe stands at a pivotal moment in its technological development. A new report from venture capital firm Atomico warns that sustained investment in artificial intelligence (AI), defense technologies, and climate tech will determine whether the bloc can compete on the global stage over the next decade. While Europe possesses strong innovation and talent, the report identifies a disconnect between ambition and execution.
The Rise of AI Dominance in Funding
Funding in Europe is shifting rapidly towards AI. In 2025, 31% of all venture capital raised went to AI and machine learning companies. The largest single European investment was secured by French AI firm Mistral AI, attracting $2 billion (€1.73 billion). This was followed by $1.1 billion (€952 million) for data center startup Nscale.
Rapid growth is also evident in AI coding companies: Swedish startup Lovable achieved a $1 billion (€865 million) valuation in just six months. Other promising European AI companies include Synthesia (AI video content) and n8n (AI workflow automation), both poised for global market leadership.
Defense Tech Investment Surges
Investment in defense technology is also growing at an accelerating pace. Overall, European defense tech attracted $1.6 billion (€1.38 billion) this year, up from $1 billion (€865 million) in 2024—the highest level of investment in over a decade.
Helsing, a German firm specializing in AI-driven drones and submarines, received one-third of all European defense funding. Other significant recipients include Isar Aerospace, Cambridge Aerospace, Quantum Systems, and Roark Aerospace. While European defense funding is distributed across more companies than in the United States, the scale remains smaller.
The Need for Talent, Research, and Computing Power
To maintain momentum, Europe must continue attracting top AI talent. The continent’s talent pool is already expanding by 22% annually since 2016. However, the report emphasizes the need to match the US in technology research and development spending.
Europe’s current R&D investments are heavily concentrated in industrial and manufacturing sectors rather than software and AI, which hinders innovation. A critical gap exists in computing power, with the US and China controlling 87% of the world’s graphics processing units (GPUs). This imbalance limits Europe’s ability to compete effectively.
“Europe’s mission has never been stronger. The talent, ambition, and ideas are all in place. What’s missing are the conditions to match that potential: simpler regulation, more patient capital, and public commitment,” said Sarah Guemouri, principal at Atomico.
Sovereignty Through Technological Capability
The report stresses that technological sovereignty is not about protectionism but about building the capability and capital to shape the future independently. Europe must establish the conditions to match its potential—simpler regulations, long-term investment, and unwavering public commitment.
Failure to act decisively risks ceding leadership in the next tech era. The next decade will determine whether Europe leads or follows.
