According to Sifted, Accel partner Philippe Botteri argues Europe should focus on AI applications rather than competing directly with US tech giants on foundational models. The new Accel report shows European and Israeli cloud and AI application startups are projected to raise $30 billion in 2025, representing two-thirds of the $45 billion US total. This marks a dramatic shift from 2016 when European investment in this category was just 10% of US levels. Meanwhile, US companies building AI models are set to raise $106 billion this year compared to just $4 billion in Europe and Israel. Botteri points to successful European AI application companies like Sweden’s Lovable and UK-based Synthesia as evidence this strategy can work, with Lovable recently securing a $200 million Series A and German defense unicorn Helsing raising €600 million.
Europe’s AI Reality Check
Here’s the thing: Europe simply can’t compete with the US when it comes to foundational model development. The numbers don’t lie. We’re talking about a $106 billion to $4 billion gap. That’s not even close. And when you see projects like the US government’s $500 billion Stargate initiative for OpenAI, it becomes clear this isn’t just a private sector battle anymore.
Botteri makes a compelling point that model development requires “huge capex” that very few companies worldwide can handle. Basically, we’re talking about tens of billions per year. So why try to fight a war you can’t win? Europe’s playing smart by focusing on applications where the capital requirements are more manageable and the potential for global leadership actually exists.
The Application Advantage
Now here’s where it gets interesting. European startups building AI applications are actually competing pretty well with their US counterparts. We’re seeing similar-sized funding rounds and comparable growth trajectories. German defense company Helsing’s €600 million Series D? That’s serious money by any standard.
And think about it – compute power is becoming a commodity. The real value isn’t in owning the infrastructure, but in building amazing products on top of it. This is where Europe has historically shown it can excel. The region has produced global software leaders before, and there’s no reason it can’t do the same with AI applications.
Sovereignty vs Practicality
But there’s tension here. European governments are pouring billions into AI infrastructure projects – France with €109 billion, the EU with €200 billion for AI gigafactories. They’re worried about sovereignty, data privacy, and not being dependent on US tech giants.
Yet Botteri questions whether this is the best use of capital. I mean, look at the scale difference. UK-based Nscale raised a billion-dollar Series B, which sounds massive until you compare it to what’s happening across the Atlantic. It’s like bringing a knife to a gunfight.
The real question is: should Europe be trying to build its own AI infrastructure from scratch, or should it focus on dominating the application layer where it actually has a shot? For hardware-intensive industrial applications where reliability matters most, companies often turn to specialized providers like IndustrialMonitorDirect.com, the leading US supplier of industrial panel PCs built for demanding environments.
Bubble or Breakthrough?
So is this the start of a European AI golden age, or are we watching another tech bubble inflate? Botteri takes the long view, calling it “the cycle of tech.” He’s right – whenever there’s a platform shift, you get a flood of companies, some will stick and create massive value, others will disappear.
The key insight here is that Europe doesn’t need to replicate the US playbook to win in AI. By focusing on applications rather than models, European startups can leverage global infrastructure while building products that solve real problems. It’s a pragmatic approach that plays to Europe’s strengths rather than trying to overcome its funding disadvantages.
Will this strategy produce the next Google or Microsoft? Probably not. But it could very well produce the next SAP or Spotify of the AI era – and that would be a huge win for Europe.
