Saturday

30th Sep 2023

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

Why new EIB chief must prioritise people's basic needs

Whoever takes up presidency of the European Investment Bank will have a huge responsibility to execute meaningful reform and make sure the bank delivers for its ultimate owners, the people and households of the EU.

Opinion

Could blockchain help EU process asylum claims?

Asylum proceedings are one of the biggest issues with the EU's migration policy, and digital identification through blockchain to register and track refugees would be an instrumental step towards the level of necessary reform.

Opinion

Punish Belarus too for aiding Putin's Ukraine war

While Belarus has not sent its own troops to fight Russia's war in Ukraine, the Minsk dictatorship has been heavily involved. As a result, Belarus must be punished for its involvement — what can the world do to sanction Belarus?

Latest News

  1. EU women promised new dawn under anti-violence pact
  2. Three steps EU can take to halt Azerbaijan's mafia-style bullying
  3. Punish Belarus too for aiding Putin's Ukraine war
  4. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  5. EU states to agree on asylum crisis bill, say EU officials
  6. Poland's culture of fear after three years of abortion 'ban'
  7. Time for a reset: EU regional funding needs overhauling
  8. Germany tightens police checks on Czech and Polish border

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Join EUobserver

Support quality EU news

Join us