Europe can still win the other AI race

Across the world, most businesses are still merely dipping their toes in artificial intelligence. Not so Schneider Electric, claims Peter Weckesser, who oversees the digital efforts of the French maker of industrial equipment. It has around 100 applications of the technology already in operation. Morgan Stanley, an investment bank, reckons that these will result in around €400m ($470m) in annual savings for the company this year. That amounts to less than 1.5% of its total costs. But Mr Weckesser has his sights set much higher. Eventually, he declares, “there will be not a single product or function at Schneider Electric that will not be affected by artificial intelligence.”

From cloud-computing to 5G, European companies have tended to be slow in adopting new technologies. Many feared that the same would happen with the most recent wave of so-called generative AI. Yet, as Mr Weckesser’s enthusiasm shows, there are reasons for optimism.

The opportunity is big. Europe has a large industrial base and it is hunting for ways to boost economic growth. It may have fallen behind in the race to produce cutting-edge AI models—it built just three of them in 2024, compared with China’s 15 and America’s 40. And it has no hyperscalers of its own to pour vast sums into building data centres. But when it comes to widespread productivity gains, adopting AI will matter more than selling it.

Already Europeans as individuals are among the most enthusiastic adopters of generative AI. According to research from Microsoft, a software giant, 32% of them use the technology, based on a population-weighted average of European countries, compared with 28% of Americans and 16% of Chinese. Many Europeans are hopeful about its promise. Pew, a pollster, asked people whether they were more excited or concerned about AI. Americans topped the list of worriers; Europeans were more upbeat (though not as positive as the Chinese, according to other surveys).

A growing number of European companies are likewise now embracing AI. A recent survey by the European Investment Bank (EIB), a multilateral financial institution, showed that around 37% of EU firms use the generative sort, compared with 36% of American ones. That figure hides plenty of variation. Nordic companies have been the most eager: Finland topped the EIB’s list, with 66% of businesses using the technology; Denmark, at 58%, came next. In Italy and Greece, by contrast, only 20% and 19% of companies, respectively, were adopting it (see chart 1). Moreover, European businesses have tended to use AI for a narrower range of functions than their American counterparts (see chart 2). Only 55% of EU firms surveyed by the EIB that were using AI were doing so in at least two areas of their business, compared with 81% of American ones.

Europe’s manufacturers, though, are well ahead of their peers across the Atlantic. The EIB’s study found that 48% of them use AI, including older types of machine learning and “big data”, whereas only 28% of American manufacturers do. Siemens, a German industrial giant (whose chief executive, Roland Busch, is pictured), has been using ai at its futuristic factory in Erlangen, in Bavaria, for over five years. More than 100 algorithms are improving production at the site. Schneider was also an early adopter. It hired its first “chief AI officer” in November 2021, a year before the launch of ChatGPT. Other manufacturers are eager to catch up. Last month 25 teams from Trumpf, a German maker of industrial tools such as laser cutters, came together for a “hackathon” to develop applications for the technology.

Many other European businesses are AI-curious. Carlsberg, a Danish brewer, has used it to create a tool for sales staff that, among other things, helps them choose the right promotions for customers. AI helps the firm design packaging and plan the transport of beer crates. Employees are encouraged to experiment with Copilot, Microsoft’s AI assistant. One new staff member who had a patchy onboarding experience created an AI tool to guide newcomers through their first month or two at the company. Carlsberg is now planning to roll it out across the world.

Some European companies are working closely with the continent’s few model-makers. In November the EU AI Champions Initiative, a lobby group, unveiled 18 such partnerships at a Franco-German summit on digital sovereignty in Berlin. These included a deal between Mistral, a French AI developer, and Helsing, a German drone-maker, to adapt AI models for defence and security, and one between Black Forest Labs, a German AI company, and Mercedes-Benz, a German carmaker, to develop tools for marketing.

What could slow the Europeans down? One risk, as usual, is regulation. Policymakers in Brussels have so far focused most of their energy on preventing the technology from wreaking havoc, resulting in the EU’s AI Act. It sets a global benchmark for safety and data protection, but critics say it creates too much red tape and will slow down innovation and adoption. Although a full reversal is unlikely, in November the EU pushed back the implementation of some burdensome parts of the legislation after complaints from businesses. Bosses are hoping for a simplified approach that would provide clarity over what they can and cannot do. That, in turn, would encourage investment.

The other risk is economic. Already the continent’s growth is sluggish. Chinese competitors in industries from carmaking to machine tools are eating into the sales of European businesses. American protectionism is only adding to their troubles. Companies struggling for growth may be tempted to cut back their investments in AI to maintain profits in the short term. To stay competitive in the long term, though, they must do the opposite. ■