EU AI Start-Ups Flooding with Capital—Will Trump’s Trade War Undermine the Surge?
European Tech Stocks Dip While AI Investments Surge
In the first quarter, overall European technology shares went down, yet the AI sector saw a notable 55 % rise—according to an exclusive report shared with Euronews Next.
Key Highlights
- General tech sector: decline in Q1
- Artificial Intelligence investments: up 55 %
- Source: exclusive report to Euronews Next
Rising Investment in European AI Start‑ups Amid Trade Uncertainty
European venture capital has surged as the continent seeks to become a global AI powerhouse, yet looming trade tensions threaten to disrupt this momentum.
Funding Gains in the First Quarter
- AI companies across Europe collectively raised $3.4 billion in Q1 2025, a 55 percent increase over the same period last year.
- Comparatively, the broader European tech sector fell 10 percent, excluding AI firms.
- The rise reflects new data from Dealroom, analyzed by Balderton Capital and reported exclusively to Euronews Next.
Impact of Current Trade Policies
- Tr
- Electronic devices—including smartphones and computers—will be exempt from these duties in the US.
- Despite these measures, European tech stocks experienced a respite on Monday, yet uncertainty remains for future developments.
Future Challenges for AI Supply Chains
The potential imposition of taxes on imported semiconductors, announced by the US on Sunday, could strain the supply chain that forms the backbone of AI technology.
Key Takeaways
- European AI funding is on a high trajectory, but broader tech investment faces headwinds.
- Trade tariffs by the United States create a complex environment for both importers and exporters.
- The semiconductor tax could jeopardize the availability of critical components for AI systems.
Don’t count European AI out
Trade Tensions Heighten European Investment Focus
German venture capital firm Project A’s investor Daria Gneusheva observes that a volatile trade climate makes investors more risk‑averse.
European firms rely heavily on GPUs and semiconductor components sourced from Asia, which could experience price spikes and supply disruptions.
Gneusheva warns that entering the U.S. market may become less attractive and more challenging amidst ongoing trade frictions.
Conversely, the current trade dispute is pushing European companies and governments to strengthen local manufacturing and R&D efforts.
Shift Toward European Markets
Tariff escalations between the United States and China have nudged many businesses to look beyond traditional suppliers. Europe is emerging as a strategic alternative.
- “It’s too early to conclude whether tariffs will benefit or harm Europe,” Gneusheva added.
The outcome depends on how European enterprises seize the opportunity.
AI Development Sparks Geopolitical Race
Launching foundational AI models has become a proxy for national security, with the U.S. and China currently ahead of Europe.
European investors are directing funds toward health technology, AI media, cybersecurity, and robotics sectors.
- Investment in AI agents reached $52 million (≈ €45 million) for new startups.
- Key players include Stockholm‑based Lovable and London‑based Paid AI.
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The AI Action Plan
The EU Announces Ambitious AI Action Plan to Modernize Europe
Last week, Technology Commissioner Henna Virkkunen unveiled the European Union’s new AI Continent Action Plan. The comprehensive scheme focuses on building robust AI infrastructure, improving data access, expanding cloud services, enhancing workforce skills, and streamlining regulatory processes. It is designed to help traditional European industries evolve alongside rapid technological change.
Building Indigenous Capabilities in Critical Sectors
Virkkunen emphasized the importance of creating in‑house technical expertise to reduce dependence on external markets.
“To avoid relying on other regions, we must develop our own capacities in essential fields,” she said. “We have identified AI as a key area where we need to strengthen our own capabilities, alongside quantum technologies and semiconductor chips.”
New AI Unicorns Accelerate Europe’s Innovation Landscape
The latest year has added two new AI unicorns—start‑ups valued at over $1 billion (approximately €1 billion) without public listings. These companies, Sweden’s Neko Health and Ireland’s Tines, bring the total number of AI unicorns in Europe to 76.
- Neko Health: Focused on next‑generation health diagnostics.
- Tines: Specializes in automated security operations.
Next Steps: Revising AI Liability Regulations
Amid the rollout of this action plan, civil society groups are urging the Commission to expedite new AI liability rules, aiming to protect consumers and foster responsible AI development across the bloc.
How did European countries fare?
AI Investment Trends across Europe
In the first quarter of this year, the United Kingdom has emerged as the leading financier of artificial‑intelligence ventures in Europe. British start‑ups and scale‑ups alone have secured approximately $4.2 billion (€3.6 billion), with $1.6 billion (€1.4 billion) directed specifically toward AI‑centric firms.
Germany’s Strong Uptick
Germany’s AI funding saw a 74 % increase from the same period last year, reaching $404 million (€355 million). This surge underscores the country’s commitment to fostering AI innovation.
France’s Mixed Momentum
- Overall tech investment in France declined by about 18 % in Q1 compared to last year.
- However, AI‑specific funding performed better than the broader tech sector, with Balderton Capital reporting a 26 % drop in French Q1 investment yet recognizing a comparatively stronger AI trajectory.
Government Initiatives and the Paris AI Action Summit
The French government has been actively promoting AI development, highlighted by the recent Paris AI Action Summit. President Emmanuel Macron announced a substantial commitment of €109 billion to AI initiatives over the coming years.
Macron likened this effort to the U.S. “Stargate” programme, which aims to invest $500 billion (€438 billion) in AI infrastructure in the next four years. He emphasized that the summit sets a high benchmark for European AI aspirations.
Balderton Capital’s Perspective
James Wise, partner at Balderton Capital, noted: “European AI ambition is only getting stronger. The AI Action Summit in Paris set the bar high on what needs to be done, and it’s great to see startups and scaleups rising to the challenge.” He added that AI firms across Europe are creating solutions in healthcare, cybersecurity, and automation, reflecting investors’ optimism about the continent’s technological potential.
