By Alexander Sukharevsky , Eric Hazan , Sven Smit , Marc-Antoine de la Chevasnerie , Marc de Jong , Solveigh Hieronimus , Jan Mischke , and Guillaume Dagorret
A three-lens approach–on adoption, creation, and energy–is required to assess Europe’s competitiveness in the emerging generative AI (gen AI) economy. While much of the current discourse centers around large language models (LLMs), European policy makers and business leaders must look beyond LLMs. Adopting a holistic approach to capitalize fully on gen AI’s potential could boost European labor productivity by up to 3 percent annually through 2030.
On adoption, European organizations lag behind their US counterparts by 45 to 70 percent. Yet this is where most of gen AI’s economic potential lies. With the technology still in its early stages and much of its productivity gains yet to be unlocked, the window of opportunity for Europe remains wide open.
On creation, Europe leads in only one of the eight segments of a simplified gen AI value chain: AI semiconductor equipment. Europe is a challenger in three other segments: foundation models, AI applications, and AI services. But it has below 5 percent market share in the remaining four: raw materials, AI semiconductor design, AI semiconductor manufacturing, and cloud infrastructure and supercomputers.
On energy, gen AI is expected to accelerate data center power demand, potentially accounting for more than 5 percent of Europe’s total electricity consumption by 2030. Without competitive electricity prices, it becomes less likely that European data centers will host gen AI applications and services.
Europe has made major progress in raising AI awareness and setting commitments, but major bottlenecks persist. Policy makers and business leaders could explore several levers, including increasing investments (such as a public innovation procurement in AI applications for healthcare and defense sectors), leapfrogging in emerging semiconductor technologies (such as quantum and neuromorphic computing), and addressing talent retention. Additionally, preparing the workforce through reskilling and mobility programs will be crucial in fully leveraging the benefits of gen AI adoption.