Europe looks beyond LLMs to close its AI gap

Europe risks repeating its slow response to the IT revolution as the US and China pull ahead in AI development. Nobel laureate Philippe Aghion argues that AI will accelerate creative destruction, bringing both job losses and new opportunities, and says Europe needs to manage that transition through education, retraining and stronger social systems.

Aghion sees limited prospects for Europe to match US and Chinese spending on large language models, but he identifies openings in specialized AI built around existing strengths. Health data, manufacturing expertise and privacy-focused regulation could support applications that appeal to users seeking more ethical and protected systems. SAP executive Thomas Saueressig similarly argues that AI should move beyond LLMs and upgrade traditional European industries, including manufacturing and physical AI.

Financing remains the central obstacle. European startups often struggle to raise capital because banks are wary of young companies without collateral, while venture investors remain less developed than in the US. Proposed fixes include harmonized EU bankruptcy rules, deeper capital markets, more pension fund participation, and a potential French-German version of DARPA to back high-risk research with long-term funding.