The more Europe regulates AI, the more it must rely on American companies to run it. With the strictest AI regulations in the world (the EU AI Act), as well as the strictest personal data privacy laws in the world, the General Data Protection Regulation (GDPR), the EU has unintentionally helped large American tech companies, such as OpenAI, dominate AI in Europe, due partly to the costly compliance standards imposed by these laws.
The reason is simple: complying with these laws requires extensive legal, data, and financial capabilities, resources that European startups often don’t have, but which their larger American cousins have in spades.
Complying with GDPR is estimated to cost small firms over $1 million annually, a huge expense on their balance sheets. Meanwhile, larger American firms, like OpenAI and Google, are well-positioned to absorb these expenses. This results in European startups struggling to compete, while foreign-developed models, such as ChatGPT, enter the market primarily through APIs and downstream deployment.
This dynamic creates a strong incentive for European firms to rely on imported AI, instead of systems that are homegrown. In that sense, large external models have functioned almost like a regulatory Trojan horse, embedding themselves across European industries, not by circumventing the law, but by benefiting from the economic asymmetry the law unintentionally creates.
Now, American Big Tech and the Trump Administration want to change European law.
Never Too Late to Change
Lately, the EU has been reassessing its regulatory framework. In November 2025, the EU released the EU Digital Omnibus, which will effectively relax many of the regulations previously outlined in the EU AI ACT and the GDPR.
While the measure is ostensibly meant to strengthen EU competitiveness by reducing compliance obligations, it arrives amidst intense pressure from the Trump administration and American tech lobbyists.
The response to the proposed changes has unsurprisingly been mixed. American Big Tech argues the softened rules aren’t soft enough, while consumer advocates in Europe claim the proposed rules concede too much to large technology firms.
Indeed, the European and American players are not competing on a level playing field. While a reset of the AI Act and GDPR would reduce the operational costs of European startups, American AI is already so deeply embedded in Europe and has such a huge cash advantage that it will still be difficult for small European firms to compete.
Currently, ChatGPT commands 80% of the chatbot market in Europe, while Google’s Gemini is quickly eating into that market share. What’s notable about this, looking down the road, is the data that ChatGPT is acquiring. All of that information is feeding American algorithms, not their European equivalents.
Tensions Flare
The transatlantic alliance between the U.S. and Europe has greatly weakened in the past sixteen months. Amidst President Trump’s routine threats to remove the U.S. from NATO, the European Union is more skittish than ever regarding its reliance on the United States. This extends to the digital realm, in which there is growing concern that if Europe does not course correct, it will become a “digital colony” of the United States.
According to a report released by the non-partisan research organization, The Rand Corporation:
“Europe trails on most measures of AI competition, and its strategic levers provide limited geopolitical influence. European AI models lag behind US and Chinese models by six to twelve months. Europe hosts only about 5 per cent of global AI computing capacity, compared with roughly 75 per cent in the US. EU start-ups attract just 6 per cent of global AI venture funding.”
These numbers are a harsh reality for the European Union, but also not specific to A.I. reliance. American tech firms dominate Europe in general. A study released by the European Parliament states:
“AWS, Microsoft Azure, and Google Cloud hold about 70% of the EU [cloud] market; European providers’ share has fallen to 13%.”
While some countries, such as Finland, are gaming out potential scenarios that result from Europe’s reliance on American tech, the integration is so thorough that it is nearly impossible to separate from U.S. firms.
The Push For More Data Centers Amidst a Backlash
While billions of dollars are flowing into new data centers across the U.S., an increasing backlash towards the resource-hungry structures has only increased. The same phenomenon is happening in Europe. Lots of people don’t like data centers appearing in their backyard, but they’re being built in record numbers all the same.
What’s more, the majority of the money flowing towards these giant infrastructure projects is for the benefit of American AI firms. In the meantime, ChatGPT still keeps most European data on American servers. There is an option for enterprise customers and API developers to maintain data residency within Europe, but that is not available to retail consumers.
While there are growing efforts within Europe to establish AI sovereignty and to build out the necessary infrastructure, American hyperscalers enjoy a massive first-mover advantage, as well as an appetite for risk not shared by their much smaller European counterparts.
ChatGPT is now so thoroughly embedded in Europe that it will be difficult for any European effort to oust it, via regulation or innovation. If its dominance is challenged at all, the challenge will likely come from an American competitor.
Author: Tim Tolka, Senior Reporter
The editorial team has taken all precautions to ensure that no persons or organizations have been adversely affected or offered.
See Also:
Why AI Super PACs Are Avoiding the Word “AI” at All Costs
OpenAI Needs to Grow 20x in 5 Years. Europe Might Not Play Along.
