Europe’s Tech Sovereignty Gamble: Can the EU Really Break Free From Silicon Valley and Shenzhen?

Jun 5, 2026 - 15:01

EBM NEWSDESK ANALYSIS -By Nick Staunton- Editor-in-Chief

The European Commission has launched its most ambitious technology independence drive yet — but the gap between legislative intent and industrial reality has never been wider.

Brussels Makes Its Move

The European Commission has proposed a sweeping set of rules intended to bolster homegrown chips, AI and cloud services as the bloc scrambles to develop tech sovereignty amid huge reliance on products and services from the US and China. The package, unveiled this week, represents the most comprehensive attempt yet to reduce what Brussels now openly describes as strategic liability.

Commission Executive Vice-President Henna Virkkunen put it with unusual directness: “We want to be sure nobody has a kill switch.” That framing — sovereignty as a defensive necessity rather than an industrial aspiration — marks a significant shift in the Commission’s public posture. For years, European tech policy was driven by regulation of others. Now it is being driven by fear of dependence on them.

The package has two legislative pillars. First, a Cloud and AI Development Act that places strict limits on how sensitive public sector data can be processed and by whom. Second, a Chips Act 2.0 that attempts to build on — and correct — the failures of the original European Chips Act, which fell well short of its semiconductor manufacturing targets. As we examined in our earlier coverage of the European Chips Act’s industrial ambitions and their labour blind spots, the first iteration of this policy was undone not by lack of ambition but by lack of execution infrastructure.

The Cloud Problem

The Cloud and AI Development Act will require EU member states to conduct sovereignty risk assessments to determine how much of their existing infrastructure relies on technology provided by non-EU companies — and then determine which parts should shift to European firms for security or competitiveness reasons.

The scale of the problem those assessments will reveal is not trivial. The digital market is currently dominated by US giants including Google, Microsoft and Apple, and Chinese conglomerates such as Alibaba and ByteDance. The most advanced chips used to develop cutting-edge AI are designed in the US and produced in Taiwan or South Korea. Europe, in short, is dependent at every layer of the stack — hardware, software, cloud infrastructure, and frontier AI models.

Europe’s total technology spending is projected to exceed €1.5 trillion in 2026, growing at 6.3% — driven by AI-optimised hardware, cloud adoption, cybersecurity, and sovereignty-aligned infrastructure investment. Germany alone is forecast to see public cloud spending grow 17% this year. The money is moving. The question is whether it is moving toward genuinely European alternatives or simply toward European deployments of American infrastructure.

For context on how this plays into the broader transatlantic technology tension, our analysis of how Trump’s regulatory agenda is reshaping the US-EU digital relationship sets out the geopolitical stakes in full.

Chips Act 2.0: Learning From Failure

The Chips Act 2.0 launches alongside the cloud legislation, aiming to build advanced semiconductor capacity on European soil — an objective the first Chips Act failed to meaningfully deliver. The revised approach links semiconductor investment directly to cloud infrastructure spending, creating an integrated industrial policy rather than a standalone subsidy programme.

The scepticism is warranted. Building leading-edge chip fabrication capacity takes a decade and tens of billions in capital expenditure. TSMC’s European plant in Dresden — the most significant inbound semiconductor investment the continent has attracted — will produce chips that are competitive with 2022 standards, not 2026 ones. The technology gap is not closing; it is widening.

Forrester has been blunt in its assessment: no European enterprise will shift entirely from US hyperscalers in the short to medium term. Despite growing interest in digital sovereignty, a complete shift away from AWS, Google Cloud and Microsoft Azure to local suppliers is impractical — specific industries may begin migrating for niche use cases, but the impact on the overall European cloud market will be negligible.

That assessment sits uncomfortably alongside the Commission’s ambitions. As we argued in our piece on Europe’s €24 trillion payments infrastructure challenge, the pattern of European policy announcing structural change that market reality then quietly qualifies is a recurring one.

The Geopolitical Calculation

What is new this time is the urgency. The combination of US trade unpredictability under the Trump administration, Chinese industrial policy advancing rapidly in AI hardware, and the Strait of Hormuz crisis exposing European vulnerability to supply chain disruption has concentrated minds in Brussels in a way that previous technology policy cycles did not.

France is already actively transitioning away from American software suites and search engines in favour of local, open-source alternatives — driven by privacy concerns surrounding extraterritorial laws like the US Cloud Act. That unilateral move by Paris is now being institutionalised at EU level. Investing.com

Reuters’ tracking of the EU’s evolving technology sovereignty framework gives the clearest real-time picture of how member states are responding to Brussels’ push — and where the political fault lines are emerging.

The Commission’s own framing says it plainly: technological dependencies are becoming strategic liabilities. Whether Europe can build the industrial capacity to match that language remains, as it has for a decade, the defining question. This time, at least, it has given itself a legal framework to try. Whether that framework becomes infrastructure or remains aspiration will define European competitiveness for the next generation. Our coverage of how BlackRock is reading European infrastructure risk and Iran’s impact on European energy and industrial strategy underscores just how much is riding on Europe getting this right.