How Collaboration Will Create an AI Superpower and Why SMEs are Key Europe can set a new benchmark for AI, one that the world will be eager to follow.

Europe is making significant strides in artificial intelligence (AI), with a €200bn initiative to back AI and supercharge construction of the gigafactories required to train complex AI models. Since DeepSeek sent shockwaves around the world, it's become clear that best-in-class chips or vast sums of money aren't needed for AI success. This presents a new opportunity for Europe, which is already having its own DeepSeek moment via France's Mistral.

While the U.S.—with its half-trillion-dollar Stargate Project and unrivalled access to capital and computing power—leads on scale, Europe's strength lies in building responsible, targeted AI solutions. In fact, DeepSeek made use of Mistral's machine-learning technologies to cut pre-training costs. So, rather than debating whether Europe can rival the U.S. head-on, a better question would be: How can Europe carve out its own path to global AI leadership?

The answer is collaboration, specialisation, and startup-driven innovation. However, achieving this vision requires more than just financial investments. Founders, governments, and industry players must come together to address the sector's most pressing challenges: Ethical dilemmas, regulatory hurdles, and scalability.

Europe's AI strategy: focus on specialisation, not scale

Europe's opportunity lies in cultivating a specialised AI ecosystem, with startups leading the charge in addressing niche market gaps overlooked by larger, generalist providers. Unlike Big Tech giants, specialist startups benefit from agility—they can pivot quickly in response to regulatory changes, turning compliance into a competitive advantage. By aligning innovation with Europe's ethical and legal standards, they can seize opportunities where others hit roadblocks and can pivot quickly in response to regulatory changes, turning compliance into a competitive advantage. By aligning innovation with Europe's ethical and legal standards, they can seize opportunities where others hit roadblocks.

While companies like OpenAI and Apple scramble to meet stringent regulations, startups can outpace them with compliant, purpose-built solutions. Far from stifling progress, these frameworks foster more reliable, less biased AI—particularly in sensitive sectors like healthcare, finance, and public services. Focusing on these high-potential areas could boost Europe's productivity growth by 3% through 2030 and unlock €575 billion in annual economic value.

Germany's Aleph Alpha, for example, is pioneering explainable large language models that align with Europe's privacy and ethical standards, making them ideal for public sector and defence applications. Meanwhile, UK-based Causaly is revolutionising drug discovery by enabling scientists to rapidly identify causal relationships in scientific literature.

Causaly is accomplishing this by enabling scientists to rapidly identify causal relationships in scientific literature.

For startups that are focused on trust, quality, and long-term impact, Europe's regulatory edge could be the key to winning in global markets. Encouraging this decentralised approach keeps the playing field open, discourages monopolies, and promotes healthy competition, ensuring no single entity controls the future of AI.

Closing the AI adoption gap for SMEs

AI development is only half of the story—its real impact lies in adoption. Competitiveness in today's market relies heavily on how well businesses integrate AI into their operations. Small- and medium-size enterprises (SMEs), which account for 99% of European businesses, are lagging behind. While nearly all Fortune 500 companies have integrated AI into their operations, nearly two-thirds (65%) of French SMEs are yet to adopt the technology and 43% of UK SMEs have no plans to—a vulnerability Europe cannot afford. AI offers SMEs powerful tools for predictive analytics, smarter decision-making, and automation that cuts inefficiencies and frees up resources for growth. have no plans to – a vulnerability Europe cannot afford. AI offers SMEs powerful tools for predictive analytics, smarter decision-making, and automation that cuts inefficiencies and frees up resources for growth.

However, unlike large enterprises with dedicated AI teams and multi-million-euro innovation budgets, SMEs often lack the resources to explore and implement these technologies. With employees juggling multiple roles and the cost of experimentation disproportionately high, AI adoption can feel unattainable.

Closing this gap must be a priority for Europe. Governments need to move beyond one-size-fits-all strategies and collaborate with the private sector to develop tailored support mechanisms. Initiatives like AI Navigator are already helping SMEs overcome hurdles by offering hands-on support and technical expertise, simplifying the AI journey and ensuring businesses adopt solutions that deliver real impact.

The role of ecosystem builders in AI growth

Ecosystem builders play a critical role in fostering the collaboration necessary for this approach, connecting founders, governments, academia, and enterprises to create thriving innovation hubs. These ecosystems act as bridges between policymakers and innovators, ensuring regulation encourages progress while maintaining safeguards. The EU AI Act sets a global benchmark, but overly complex rules risk stifling innovation. A more streamlined, pro-business framework is crucial to unlocking the full potential of these ecosystems.

Each stakeholder has a distinct role to play:

• Academia nurtures talent and advances research aligned with Europe's economic priorities.
• Governments must provide adaptive regulation that protects citizens while encouraging innovation.
• Startups translate university research into scalable products and services.
• SMEs serve as agile innovators and early adopters, bridging the gap between cutting-edge technology and real-world applications.
• Enterprises act as key B2B adopters, driving demand and providing scale for AI breakthroughs.

Collaboration: The key to sustainable growth

For Europe to realise its full AI potential, collaboration must take priority. Governments, founders, and industry leaders need to address key challenges together—from scaling progress in vital sectors like healthcare, to navigating regulatory complexities and ethical concerns. By fostering a culture of knowledge-sharing, Europe can support SMEs, create high-quality jobs, and drive long-term economic growth.

Europe may never dominate AI in terms of raw scale and capital, but it doesn't have to. Its strength lies in depth, responsibility, and strategic influence. By focusing on specialisation, trust, and meaningful innovation, Europe can set a new benchmark for AI, one that the world will be eager to follow.