Industry research
Scope
Europe
Companies
43
Table of contents
What does the Gen AI market landscape look like in Europe?
The Gen AI market is still in its emerging stage, showing different levels of fragmentation across its subsegments. European players are lagging behind the US counterparts, with only a few European-originated models competing globally, translating to a market share of ~5-15% in 2023 (McKinsey, October 2024). Notable examples include Mistral AI and Aleph Alpha. (The New York Times, June 2024). However, in the technological race to constantly improve models’ performance, these players are significantly underfunded in comparison to the US counterparts, showing one of the European market constraints for innovation. To illustrate, Mistral AI raised only ~€468m in 2024 versus Perplexity (US) raising ~€857m and OpenAI raising ~€6.4bn. Despite a smaller investment landscape, other factors resulting in lower competitiveness of European companies include complex regulations (e.g. EU AI Act), limited ability to attract and retain AI talent, market fragmentation and language barriers. Without addressing these challenges and creating a unified Gen AI support ecosystem, Europe may struggle to increase its role in this space (SILTA, May 2024; Medium, October 2024).
What is the level of investor activity in the European Gen AI Industry?
Investor-led interest has been significant, with >90% of identified assets being sponsor-backed. This is primarily driven by the VC activity on the back of the large return potential from emergent winners, rapid technological advancements and accelerating adoption of Gen AI tools. To illustrate, the Gen AI sector in Europe captured a quarter of all venture capital investment in the region, totalling ~$13.7bn in 2024 (Tech.eu, January 2025). On the other hand, (i) unfavourable regulations, (ii) lower innovation potential in Europe vs the US, (iii) lacking necessary AI infrastructure and (iv) soaring Gen AI training costs act as a detracting factor for investors.
What are the key ESG considerations in the European Gen AI Industry?
ESG topics in the European Gen AI industry relate to environmental and social issues. From an environmental perspective, significant energy and water consumption remain a top concern. This is driven by the high computational demand for training and the use of AI models. To tackle this, players can implement more efficient models to reduce computational demand and power data centres using renewable energy. Social challenges involve privacy, bias, trust and misinformation threats. In response, the EU introduced the AI Act, aiming to regulate this space by establishing ethical standards and ensuring sustainable Gen AI development.
Bloomberg (March 2024) forecasts the global Gen AI market to grow from ~$128bn in 2024 to ~$1.4tn by 2032 (+34.4% CAGR 2024-2032)
The European Gen AI applications market is projected to reach ~$110.8bn by 2030, up from ~$19.5bn in 2025 (+41.5% CAGR; Statista, March 2024)
AI adoption is accelerating in Europe, with over a third of businesses using Gen AI to streamline operations, reduce costs and boost productivity. This reflects a broader trend of digital transformation, as businesses embrace AI to stay competitive in an increasingly tech-driven market (World Economic Forum, February 2024)
Advancements in AI hardware, such as specialized chips and GPUs, are driving AI efficiency and reducing costs, allowing for the execution of more complex tasks. These developments fuel progress in LLMs, GANs and transformers, enhancing generative AI capabilities and accelerating adoption across various industries (Journal of Information Technology and Sciences, March 2024)
The rapid growth of cloud computing is empowering businesses to deploy and scale generative AI efficiently. With platforms such as AWS, Google Cloud and Azure offering advanced computing power and storage capabilities, the development, training, and deployment of AI models accelerate (Rapyder, May 2024)
Europe's fragmented venture capital investment landscape and stringent regulatory environment (e.g. The EU AI Act) will continue to inhibit innovation. In contrast, the counterparts in the US have better access to financing and less regulatory hurdles, resulting in a widening gap in technological advancements (SILTA, May 2024)
Limited investment in AI infrastructure and data centres in Europe hampers the adoption of the Gen AI technologies. The lack of sufficient data centre capacity threatens the development of advanced AI models, further increasing the risk of European players falling behind the global competition (Euronews, June 2024)
Soaring costs for training Gen AI models are challenging short-term profitability. High energy expenses and the need for significant computational power strain businesses, making it challenging to balance investment with returns (ING, January 2024)
With the full report, you’ll gain access to:
Detailed assessments of the market outlook
Insights from c-suite industry executives
A clear overview of all active investors in the industry
An in-depth look into 43 private companies, incl. financials, ownership details and more.
A view on all 135 deals in the industry
ESG assessments with highlighted ESG outperformers
