Saturday

4th Dec 2021

EIB warns of €10bn investment gap in AI and blockchain

  • The US and China account for 80 percent of the €25bn of annual equity investment in AI and blockchain (Photo: BeatingBetting.co.uk)

The EU is falling behind the US and China in artificial intelligence (AI) and blockchain technologies, partly due to an annual investment shortfall of up to €10bn, the European Investment Bank (EIB) has found.

In a report, published on Tuesday (1 June), the EU bank said that the US and China together account for 80 percent of the €25bn of annual equity investments in both technologies, while the 27-nation bloc accounts only for seven percent of the total, investing around €1.7bn.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Equity investment refers to the expenditure made in a firm by purchasing shares of that company in the stock market.

Between 2010 and 2019, global equity investments in AI and blockchain technologies had an annual growth rate of 38 percent - amounting to some €80bn-€85bn.

The EIB said these technologies are expected to play a central role in the bloc's green and digital transitions, accelerating the transformation of sectors hit hardly by the Covid-19 pandemic, such as financial services, healthcare and business intelligence.

However, it has identified an annual investment gap of about €5bn to €10bn.

"Companies and governments in Europe are substantially underinvesting in AI and blockchain compared to other leading regions, and it has become clear that the European Union struggles to translate its scientific excellence into business application and economic success," the EIB said.

The EU mainly provides early-stage financing for small and medium-sized enterprises (SMEs) working on AI and blockchain, but then it underperforms in subsequent rounds of financing, such as expansion and growth stages, the report points out.

As a result, there has been a strong movement of companies from the EU to the US.

American companies account for about 44 percent of European startup acquisitions.

In Europe and the US, most AI companies focus on information and communications or in scientific and technical activities, while about half of China's AI firms operate in the manufacturing sector.

Among the reasons for the EU's investment gap, the EIB cited the limited appetite for investments in these technologies due to high upfront investment needs, the lack of knowledge and specialisation of EU venture capital funds, and the difficulty for SMEs to connect with investors.

Another explanation for this gap is the limited role played by large institutional investors such as pension funds, insurers and endowments in financing later-stage startups involved in AI and blockchain.

Yet, this shortfall appears to be dominated by AI, compared to the gap in blockchain investments.

Since its creation in 2008, blockchain technology has been mainly used for financial services and cryptocurrencies. But it is now expanding to other sectors such as media and telecommunications, healthcare and government services.

'Widening the gap'

Meanwhile, the EIB also said that access to finance might become more challenging in the short run as a result of market conditions, "potentially widening the investment gap".

"EU and member state support schemes could plug part of the gap, but private markets will clearly need to contribute the balance," the bank said.

Moreover, innovation hubs need to be better connected to increase the flow of talent, experience and funding access.

In the EU, Paris and Berlin are the largest hubs of AI and blockchain SMEs, followed by Amsterdam, Barcelona and Madrid - although the highest number of companies in these sectors are located in Germany and Austria.

Last April, the European Commission announced that it aims to turn Europe into a global hub for trustworthy AI - with the first-ever legal framework on AI and a new coordinated plan with member states.

EU seeks global AI leadership with new rules

The European Commission unveiled the first-ever legal framework to regulate the use of artificial intelligence in Europe - banning 'social scoring' systems and facial recognition for law enforcement in public spaces, with narrow exceptions.

Opinion

EU vs US tech agenda under Biden

What will the new Joe Biden administration bring to the realm of digital policy, and how will it affect the relationship with the EU?

EU Commission sticks to €20bn AI target, despite Covid

Despite the coronavirus crisis, the European Commission wants member states to attract more than €20bn of investment in artificial intelligence (AI) annually over the next decade to make Europe a leader of so-called 'trustworthy artificial intelligence'.

Opinion

Will EU stop its investment bank hiding a third of its lending?

This week, the European Investment Bank's board of directors, comprised of European Commission and member state representatives, will decide on a new transparency policy. It must seize this opportunity to salvage its image by drastically improving the bank's information disclosure

News in Brief

  1. Covid: Belgium might close schools and cultural activities
  2. EU consumers can sue Facebook, judge advised
  3. French centre-right tilts toward Pécresse
  4. EU urged to blacklist Israeli spyware firm
  5. Austria's ex-chancellor Kurz quits politics
  6. EU agency: Omicron to be over half of infections 'within months'
  7. New German restrictions target the unvaccinated
  8. EU commission unveils proposal to digitalise justice systems

Belgian impasse leaves asylum seekers on snowy streets

Asylum seekers have been sleeping in the streets, some for weeks, in the Belgian capital Brussels - as the government grapples over the lack of capacity to accommodate them despite months of debate over the issue.

EU energy ministers clash amid gas price uncertainty

EU energy ministers met on Thursday to debate spiking gas and electricity prices, and clashed over market reform - with some countries, led by Germany, opposing actions put forward by France and others.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew report reveals bad environmental habits
  2. Nordic Council of MinistersImproving the integration of young refugees
  3. Nordic Council of MinistersNATO Secretary General guest at the Session of the Nordic Council
  4. Nordic Council of MinistersCan you love whoever you want in care homes?
  5. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  6. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals

Latest News

  1. Belgium tightens Covid rules as health system 'is cracking'
  2. EU and US tighten screw on Lukashenko
  3. Belgian impasse leaves asylum seekers on snowy streets
  4. EU 'missed chance' to set fossil-fuel subsidies deadline
  5. EU energy ministers clash amid gas price uncertainty
  6. ECJ told to dismiss Poland and Hungary rule-of-law challenge
  7. Covid: what Germany got right - and wrong
  8. Quick Take: Enrico Letta

Join EUobserver

Support quality EU news

Join us