What are Europe’s sovereign cloud/AI ambitions

Investing.com -- Europe’s push for data sovereignty and artificial intelligence (AI) self-reliance is accelerating as governments and corporations seek to reduce dependence on U.S. cloud providers.

According to a recent UBS Global Research, the European Union (EU) and its member states are promoting locally controlled digital infrastructure amid rising concerns over data privacy, geopolitical risk and access to computing power.

The brokerage said Amazon, Microsoft and Google together account for more than 80% of Europe’s infrastructure-as-a-service (IaaS) market.

In contrast, sovereign cloud, defined by Gartner as cloud services that ensure data, operational and technological control within European jurisdictions, represented roughly 10% of the market in 2024.

Gartner expects this share to surge to 47% by 2028, expanding at an 86% compound annual growth rate compared with 12% for non-sovereign European IaaS.

UBS noted that while “isolated/managed clouds are 10-20% more expensive to run than "public" cloud,” their adoption may be driven by regulation such as the GDPR, EU Data Act and European Data Governance Act.

The EU’s proposed Cloud and AI Development Act marks a central plank in this strategy. It seeks to triple the bloc’s data centre capacity within five to seven years and mobilize €200 billion in AI investment.

This includes a €20 billion fund to build five AI “gigafactories,” each with more than 100,000 advanced processors, and a €10 billion fund to develop over 13 smaller factories with about a quarter of that capacity.

UBS estimated that “taking the first phase of Stargate’s Abilene project as a template would imply a capital cost of c$6-8bn per gigafactory” based on Nvidia’s H100 GPU architecture, with up to 35% of the capital expenditure potentially subsidized by the EU and member states.

Interest among industry participants has been robust. The European Commission received 76 expressions of interest across 16 member states to host AI gigafactories, with decisions expected by the end of 2025.

German web-hosting firm IONOS confirmed it had applied with construction group HOCHTIEF, stating its proposal aimed to “support large scale AI workloads with a fully sovereign and sustainable ecosystem.”

Deutsche Telekom, Europe’s largest telecom operator, said it plans to partner with SAP, Nvidia and power companies such as RWE, noting, “we are trying to partner with RWE… former coal sites or nuclear power plant sites where we have water and power supply.”

It has already announced a sovereign industrial AI cloud in Munich deploying 10,000 GPUs, an increase of 50% in Germany’s GPU capacity.

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Enterprise software group SAP remains cautious on direct investment, saying it was “not seeking a role as an operator or investor in connection with AI gigafactories,” though it will “contribute our strengths as a technology and software provider.”

Still, its Delos sovereign cloud now offers 4,000 GPUs for AI workloads. French software firm Dassault Systèmes’ Outscale unit, which secured the SecNumCloud 3.2 certification, joined the NumSpot project alongside Bouygues Telecom and Banque des Territoires to serve the public sector.

While Europe’s sovereign cloud market remains small, about $4 billion of the $37 billion regional IaaS market in 2024, UBS said growth is being accelerated by AI’s infrastructure demands and new funding frameworks.

“AI advances have raised awareness of the strategic value of data,” the brokerage said, adding that digital sovereignty is no longer just a regulatory issue but an industrial priority.

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