European AI has capital and talent. What it lacks is customers.

European AI start-ups raised $23 billion in the first half of the year, and Europe holds six spots in the top ten of the WIPO innovation ranking. Growth is now being held back by European companies, which rarely buy from local suppliers.

Europe has been hearing for years that it cannot turn good science into major technology companies. The latest data show that there is more and more money for artificial intelligence. The weak point turns out to be demand: large enterprises and public administration rarely buy from European start-ups. For a manager choosing an AI supplier, this is a practical question about data, vendor lock-in and the maturity of the offering.

Money is flowing, but scale is slipping across the ocean

According to a joint report by Crunchbase and HumanX, European AI start-ups raised $23 billion in the first half of 2026. That is 130 percent more than a year earlier and 55 percent of all venture capital funding in the region.

At the same time, the World Intellectual Property Organization (WIPO) published the Global Innovation Index 2026. Six of the world’s ten most innovative economies are in Europe. Switzerland has been in first place for the 16th year in a row, followed by Sweden, while the top ten also includes the United Kingdom, the Netherlands, Finland and Denmark.

These proportions do not carry over to the capital market. According to WIPO estimates for the first two quarters, Europe accounts for 9.9 percent of the global value of venture capital deals this year. North America has 72.6 percent, Asia 15.9 percent. Globally, AI absorbed 77 percent of the value of these deals in the first half of the year. WIPO describes Europe’s problem as turning its research and industrial strengths into fast-growing companies.

Companies do not buy from start-ups

Fabrizio Del Maffeo, founder and CEO of Axelera AI, which makes inference chips (for running ready-made AI models), said at the HumanX conference in Amsterdam that Europe has a weakly developed habit of large companies buying from start-ups. So the mechanism known from the US is missing: the first large customers generate revenue, revenue attracts capital, capital makes it possible to win more customers. In his view, Europe also has 440 million potential users and large research resources.

A similar conclusion comes from an analysis by startuprad.io. Public procurement in Europe is worth about €2 trillion a year, or about 14 percent of EU GDP, but it is fragmented into 27 national systems. Selling to medium-sized family businesses in Germany takes 6 to 12 months. The author calls this an order-speed gap: the first barrier to scaling a young company may be the pace of orders, not a lack of capital.

Companies’ declarations look different. In a Gartner survey of 241 IT leaders in Western Europe conducted in mid-2025, 61 percent wanted to use local cloud providers more often because of geopolitical uncertainty. As many as 44 percent had already started reducing their use of global providers. However, these are declarations regarding the cloud. The materials do not show whether this is already translating into orders for European AI companies.

What a company gains by choosing a supplier from Europe

The most important argument concerns data. Mehdi Ghissassi, chief product and technology officer at AI71 in Abu Dhabi, previously responsible for product development at Google DeepMind, believes that sovereignty is determined by the application layer, because that is where a company keeps its data and know-how.

Loosely translated: if you hand over your trade secrets and know-how to a supplier, you have no guarantee that the supplier will not one day replace you. Ghissassi also believes that competing to build large models makes no sense, because at most a few companies in the world can afford it. Del Maffeo says something similar: Europe does not need to control the entire chain, from energy to applications.

The second argument is regulation. In Omdia’s “The Great Repatriation” survey, 51 percent of respondents said compliance with the EU AI Act was a very important reason for investing in sovereign AI. Gartner forecasts that spending on sovereign cloud in Europe will rise this year from $6.9 billion to $12.6 billion, or by 83 percent. In our view, companies that prepare for this change earlier will have easier conversations with auditors and customers.

Vendor lock-in does not disappear, it only changes address

The best test case is Mistral AI. As reported by Sifted, on 11 August the French company announced a coalition of major European companies financing the construction of its infrastructure: ASML, CMA CGM, Caisse des Dépôts, Capgemini and Amadeus. The goal is 200 megawatts of computing power by the end of 2027 and 1 gigawatt by 2030.

The mechanism is called European Compute Units: customers pay upfront for multi-year access to capacity that does not yet exist. The contracts are expected to run for about five years. Asked about the possibility of exiting early, Mistral CTO Timothée Lacroix replied briefly: “There is no getting out”.

This is a clear example of European companies acting as customers of European AI. At the same time, some analysts point out that the coalition is buying infrastructure that is still being built. We did not find an independent assessment of this model from the perspective of a customer outside the coalition. In our view, however, one thing is clearly visible: choosing a European supplier does not remove dependence on a single supplier, it only moves it closer. On top of that comes the maturity of the offering. After five years, Axelera AI has about 600 customers and two generations of chips, and that is a different scale from global players.

How to approach choosing an AI supplier

Taken together, these data points suggest several questions worth asking before signing a contract, regardless of the supplier’s country of origin:

• Where is the company’s data stored and processed, and who has access to it?
• Does the contract allow you to exit and move your data and configuration to another supplier?
• Is the service available today, or is it still being built, and what guarantees does the service-level agreement (SLA) provide?
• Which processes can start with a pilot at the application layer instead of a multi-year contract?

Del Maffeo says he is worried about Europe’s delay, because when value is created elsewhere, European economies weaken. For an individual company, the conclusion is more down to earth. A European supplier may offer greater control over data and easier regulatory compliance, but it requires careful checking of maturity and exit terms. The most sensible approach is to start with one process where data is most valuable and compare local and global offers using the same criteria.