Europe's largest tech companies are warning that the EU's AI Act and broader regulatory approach are driving innovation elsewhere, even as Brussels invests billions in digital sovereignty infrastructure. The tension reveals a fundamental challenge: how can Europe regulate emerging technology while simultaneously building the competitive capacity to compete with the United States and China ?

Why Is Europe's Top Tech Executive Criticizing the AI Act?

Christophe Fouquet, CEO of ASML, Europe's most valuable tech company by market capitalization at 515 billion euros, delivered a blunt assessment of Brussels' approach to artificial intelligence regulation. ASML manufactures the specialized machines that produce the world's most advanced semiconductor chips, making Fouquet one of the most influential voices in global technology.

"We didn't start running, we didn't start even walking, and we already had in front of us all the obstacles to not be able to make even the first step," Fouquet stated, arguing that the EU's regulatory framework was "not serving the industry."

Christophe Fouquet, CEO of ASML

Fouquet's criticism centers on the EU AI Act, which he views as premature regulation that penalizes European companies before they have developed competitive AI products. The concern is particularly acute because 99 percent of ASML's machine sales come from outside Europe, a striking figure for a company headquartered in the Netherlands and central to the global AI supply chain. If European companies cannot develop AI applications domestically due to regulatory constraints, they will simply relocate their operations elsewhere.

In May 2026, ASML joined a coalition of Europe's largest industrial companies, including Airbus, Ericsson, Mistral, Nokia, SAP, and Siemens, in warning European Commission President Ursula von der Leyen that the legislation risks hobbling European competitors before they can challenge U.S. and Chinese rivals.

What Is Europe Actually Building to Compete in AI?

While tech leaders criticize regulation, the European Commission is simultaneously investing heavily in digital infrastructure through the EURO-3C initiative, announced at the 2026 Mobile World Congress. This project aims to create the first telco-edge-cloud federated infrastructure in the EU, combining telecommunications networks, edge computing, cloud services, and artificial intelligence capabilities from over 70 organizations across Europe.

The EURO-3C project responds to a critical vulnerability: the EU's dependence on U.S. cloud providers. Just four American hyperscalers, AWS, Microsoft Azure, Google Cloud, and IBM Cloud, account for approximately 70 percent of EU cloud services. This concentration creates both economic and security risks, particularly given concerns about the U.S. CLOUD Act, which allows U.S. federal law enforcement to compel American firms to hand over data stored abroad.

The project is structured around three key elements designed to reduce European dependence on non-EU providers:

• Federation: An interoperable architecture that connects existing computing and network capabilities from multiple operators and cloud providers under a common European framework
• Pan-European Scale: Collaboration between telecommunications operators, industry, technology suppliers, small and medium-sized enterprises, and research centers to achieve industrial-scale deployment
• Validated Impact: Nine high-value business use cases that will demonstrate real-world applicability and scalability of the federated infrastructure

EURO-3C is funded through Horizon Europe, the EU's innovation program spanning 2021 to 2027. The predecessor program successfully allocated 900 million euros to establish the European High Performance Computing Joint Undertaking in 2018, which has since inaugurated 12 European supercomputers. Three of these, Lumi, Leonardo, and Mare Nostrum 5, rank in the top ten worldwide.

How Can Europe Balance Regulation With Industrial Competitiveness?

The core tension facing Brussels is whether Europe can simultaneously regulate AI development and build the industrial capacity to compete globally. Fouquet argued that the Commission should focus on creating demand for AI applications rather than building infrastructure or imposing restrictive rules.

"If you had a fab like this in Europe, all the wafers that would be manufactured would be exported to the United States," Fouquet explained. "So then you'll be in a situation where Europe subsidizes a big project and the output of this project goes somewhere else."

Christophe Fouquet, CEO of ASML

The EU has already begun adjusting its regulatory approach. In May 2026, policymakers moved to delay parts of the AI Act and carve out a lighter regulatory regime for industrial AI applications as part of a simplification package. Fouquet welcomed this shift but argued that the same logic should apply more broadly, warning that European companies would develop AI elsewhere if the bloc's rules remained too restrictive.

The European Commission's response emphasizes that regulation actually supports innovation. Thomas Regnier, a Commission spokesperson, stated that "the AI Act supports innovation by increasing trust, and trust leads to increased uptake and investments". The Commission also highlighted that the recent simplification package brings "clear timelines and simpler and innovation-friendly rules for AI".

What Does Digital Sovereignty Actually Mean for Europe?

Complicating the regulatory debate is the fact that the European Commission has not yet formally defined "digital sovereignty," a concept that means different things to different stakeholders. On June 3, 2026, the Commission is scheduled to release its Tech Sovereignty Package, which will include a formal definition of digital sovereignty for the first time.

The definition matters enormously because it will shape public procurement across all 27 EU member states and signal how open the bloc intends to remain to foreign technology providers, particularly those from the United States. Currently, digital sovereignty is understood through three competing lenses:

• Data Control: Ensuring that European data is stored and processed within the EU, reflecting concerns about extraterritorial access through laws like the U.S. CLOUD Act
• Legal Control: Establishing legal frameworks that govern the physical and digital infrastructure of technology systems, addressing concerns about foreign intelligence access
• Vendor Nationality: Prioritizing European companies as technology providers, a newer dimension that reflects growing concerns about so-called "kill switches" and geopolitical dependence

These three dimensions create inherent trade-offs. Strict data localization, for example, can reduce operational resilience during conflicts or natural disasters. Ukraine and Estonia have both moved away from rigid data localization requirements in favor of distributed, cloud-backed systems that provide better protection against data loss.

The challenge for Brussels is defining digital sovereignty in a way that responds to legitimate European concerns about technological independence without exacerbating transatlantic tensions. U.S. Ambassador to the EU Andrew Puzder has already signaled that the United States considers attempts by the EU to "improve the competitiveness of European entities by limiting the competitiveness of U.S. entities in Europe" a red line.

The stakes are high. Europe's innovation rate in advanced technologies lags the United States, contributing to a widening GDP gap. The 2024 Draghi report, which analyzed EU industrial policy, noted that "the EU has a unique opportunity to lower the costs of AI development by increasing computational capacity". Yet without competitive European companies developing AI applications, the infrastructure investments may simply subsidize exports to the United States, as Fouquet warned.

The coming weeks will reveal whether Brussels can craft a regulatory and industrial strategy that allows European companies to compete globally while maintaining the bloc's commitment to rights-based governance and data protection. The answer will likely determine whether Europe becomes a genuine player in the global AI economy or remains dependent on foreign technology providers for decades to come.