Can Europe catch up on A.I.?

If you were asked to bet on who will lead the world in Artificial Intelligence by 2030, which country would you pick? China, the United States, India? It is difficult to imagine that one would bet on Europe. If this is the case for you, this article might change your mind.

The article aims to show the gap between Europe and the rest of the world in terms of investments, research and development concerning A.I. It will also estimate the best approach to the question “Can Europe catch up on A.I.?”.

In order to make our quick analysis, we are going to follow the path of a Deutsche Bank Research paper published at the beginning of 2020, titled “(How) will the EU become an A.I. superstar? and two McKinsey reports, Notes from the AI frontier: Tackling Europe’s gap in digital and AI and How nine digital frontrunners can lead on AI in Europe.

One of the most important preconditions for the spread of A.I. is the advancement and adoption of digital technologies. Europe’s digital gap, which is visible in exhibit 1 of McKinsey report (showing the percentage of digital ICT on GDP for USA, CH, EU), risks to critically affect its chances of playing a significant role on A.I. Source: McKinsey

Similarly, Exhibit 10 of the McKinsey report shows the dependence of AI development on previous adoption of digital technologies generalized to 430 European companies. Only 23% of these companies affirm to be independent of both technology tools and capabilities. Source: McKinsey

Source: Deutsche Bank Research

Source: Deutsche Bank Research.

Graph 3 (on the left) of Deutsche Bank’s report, evidently depicts the predominance of the US, China and Israel in the numbers of recorded A.I. startups, closely followed by former-EU-member the United Kingdom, Canada and Japan. France (the first European country on the list) can be seen in seventh place. Furthemore, chart 4 (on the right) illustrates that only five of the top 100 global A.I. startups (those considered most promising by CB Insights) in 2020 were from EU27. The majority of them originated in the US, the UK and China.

Analyzing the amount spent on R&D on software and computer services (good indicators of related A.I. Research), we immediately notice a persistent gap between Europe and the US. If we take the global R&D spending into account we notice that the EU accounts for only 4.7% of it while China and the US account for 16.7% and 26.8% respectively. (Graph 14 from the Deutsche Bank report).

Another important factor influencing R&D on A.I. and new technologies is the dominance in big tech companies in the US and China, compared to the EU. These companies focus on concentrating A.I. talent and research capabilities as they try to speed up the transition process towards A.I., as a means of establishing a dominant role in the new market.

Source: Deutsche Bank Research