European tech founders are increasingly seeking funding from the United States for their artificial intelligence (AI) projects, a trend highlighted in a recent Wall Street Journal report dated October 4. This shift raises concerns about Europe’s aspirations to establish itself as a global AI hub, competing with dominant players like the United States and China.
The transition toward U.S. funding stems primarily from the significant upfront costs associated with AI—namely, the infrastructure needed for computing and the specialized talent required to drive such projects. Although European venture capital has made strides in recent years, it still lags behind the U.S. In the first nine months of the current year, U.S.-based AI and machine learning startups attracted over $160 billion, while European counterparts managed only $20 billion, according to pitching and investment data from PitchBook.
A noteworthy factor influencing this trend is the increasing participation of U.S. investors in European AI startups. As of September 30, 2023, American investors contributed around $14.2 billion to 549 European AI and machine learning ventures, surpassing the $11.7 billion reported in all of 2024. This surge accounts for over 71% of the total value of deals, illustrating a significant increase in American financial interest.
Patrick Smith, founder of the AI cybersecurity company Zally, elucidated his issues in securing sufficient funding in Europe. He emphasized the need for extensive financial backing for initial research, development, and patent filing. According to Smith, American investors have a better grasp of the financial runway required and are more willing to accommodate the substantial burn rate associated with early-stage AI ventures.
The capital-intensive nature of the AI industry is well-recognized, with a recent report from Citi projecting global spending on AI infrastructure could exceed $2.8 trillion by 2029. This massive influx of capital is not only benefiting AI model developers but is also extending to adjacent sectors, such as chips and cloud infrastructures. By contrast, industries like healthcare, mobility, and climate are experiencing slower deal cycles and smaller funding rounds.
The caution in spending also extends to corporate finance leaders. A report from PYMNTS revealed a significant decline in the percentage of CFOs planning to increase investment in generative AI, dropping from 53.3% the previous year to just 26.7% for 2026. While half of the firms experiencing strong returns intend to ramp up their investment, only 16.7% of firms witnessing negligible returns plan to increase their spending. This divide highlights the complexities and paradoxes surrounding the economics of AI adoption—while significant investment is projected, the financial returns are still maturing.
In conclusion, the trend of European tech firms seeking U.S. funding for AI projects underscores several underlying issues: the high cost of entry into the AI sector, the growing influence of U.S. investors in the European market, and the complex economic landscape surrounding AI investments. As the European tech landscape evolves, the challenge remains to enhance local funding capabilities to compete effectively in a global arena increasingly dominated by well-capitalized U.S. firms.
