Europe faces a delicate balancing act as it pursues tech sovereignty amid heavy reliance on US and Chinese technology. The 2024 Draghi report warned that the EU depends on non-EU providers for over 80% of its digital infrastructure, raising concerns about potential US leverage through its tech supremacy.

Brussels unveiled a legislative package including a Cloud and AI Development Act that would require sovereignty risk assessments across four tiers. In the most critical level 4 contracts for defence, suppliers must ensure software and hardware are made in the EU. A revamped Chips Act proposes streamlined permitting and direct EU investment in cross-border projects.

Microsoft, Google and Amazon dominate roughly 70 per cent of Europe's cloud computing market and have offered sovereign solutions. However, critics argue these remain vulnerable to the US Cloud Act, which permits overseas data access. The EU aims to nurture European competitors rather than impose broad protectionist measures.

The real solution lies in completing Europe's single market and capital markets framework. Initiatives like EU Inc seek to streamline corporate rules across member states. Without these foundations, European startups will continue migrating elsewhere rather than scaling into global competitors.