European companies are demonstrating a clear commitment to investing in artificial intelligence and green energy, navigating a landscape of economic uncertainty and rising operational costs. A major survey from the European Investment Bank (EIB) reveals that firms across the Union are pushing forward with strategic investments intended to bolster their long-term competitiveness. These spending decisions are occurring even as businesses show caution, with many prioritizing modernization over large-scale expansion in the face of persistent challenges.
This wave of investment is unfolding within a complex and demanding new regulatory environment. The implementation of the European Union’s landmark Artificial Intelligence Act, the world’s first comprehensive rulebook for AI, is fundamentally reshaping how companies develop, deploy, and fund the technology. While the EIB data shows a strong appetite for innovation, corporate strategies are now intrinsically linked to the high-stakes demands of compliance, forcing a careful re-evaluation of the risks and returns of AI projects across all sectors of the economy.
Dual Priorities in a Tense Climate
According to the 2025 EIB Investment Survey (EIBIS), which polled over 12,000 EU firms and 800 in the United States, businesses remain resilient despite a general investment slowdown. An overwhelming 86% of EU companies continued to invest, signaling a focus on future-proofing their operations. This investment is sharply focused on what many see as the twin engines of future growth: digitalization and sustainability. The survey found that 92% of companies are directing resources toward measures that reduce greenhouse gas emissions, a testament to the continent’s steadfast commitment to the green transition.
This dual focus is occurring amid significant headwinds. Debora Revoltella, Chief Economist at the EIB, noted that while uncertainty weighs heavily on firms, they are “so far weathering the shock.” She added, “There is a clear commitment to invest in digitalisation and green initiatives, which are crucial for maintaining competitiveness in the evolving global market.” Government policy is also playing a role in guiding these decisions. The survey found that 16% of firms making investments receive some form of public financial support. Of that aid, 41% is explicitly dedicated to green transition projects and 29% is targeted at fostering innovation, demonstrating a coordinated effort to steer capital toward strategic goals.
The AI Adoption Paradox
The push for digitalization is most evident in the adoption of artificial intelligence. The EIB survey reveals that European firms are embracing advanced AI at a pace nearly identical to their American counterparts, with 37% of EU companies deploying generative AI compared to 36% in the US. This parity in initial adoption suggests a shared recognition of AI’s transformative potential for automating processes, monitoring supply chains, and gathering market intelligence. However, the data also uncovers a significant divergence in the breadth of AI application.
While EU firms are adopting the technology, they appear more hesitant to integrate it deeply across their operations. The survey data shows that 81% of US businesses using AI do so in more than two distinct business activities, such as marketing, human resources, and customer service. In contrast, only 55% of European companies have deployed AI in more than two functional areas. This indicates that many European firms may be limiting their AI investments to targeted, high-impact areas rather than pursuing broad, enterprise-wide transformation. This cautious approach may be linked to the specific regulatory and operational challenges present in the European market.
Navigating the World’s First AI Rulebook
The cautious but steady investment in AI is happening under the shadow of the EU AI Act, a comprehensive legal framework that began to take effect in 2025. The Act aims to make Europe a hub for “trustworthy AI” by establishing harmonized rules that ensure systems are safe and respect fundamental rights. It affects all companies operating in the EU, regardless of where they are headquartered, and introduces a new layer of strategic calculation for any AI-related investment.
A Risk-Based Framework
The Act’s central feature is a tiered, risk-based approach to regulation. AI systems are categorized based on the level of risk they pose, from minimal to unacceptable. Applications deemed “high-risk”—a category that includes AI used in critical infrastructure, employment decisions, and financial services like creditworthiness assessments—face stringent obligations. Companies deploying these systems must conduct rigorous testing, ensure transparency in their operations, and perform continuous monitoring long after the AI is on the market. These requirements demand significant upfront and ongoing investment in compliance infrastructure and expert oversight.
Compliance as a Strategic Decision
The costs associated with the AI Act are a major factor in corporate investment strategies. Compliance can require substantial spending on technical modifications, process documentation, and additional manpower, altering the return-on-investment calculations for many AI projects. This has led some investors to view the regulation primarily as a cost center. However, a more forward-looking perspective is emerging, with many firms and investors treating compliance as a strategic differentiator. Companies that build compliant, trustworthy AI systems early can build a “competitive moat,” potentially commanding premium valuations from acquirers and gaining the trust of consumers. The Act’s phased implementation, with deadlines for high-risk systems becoming mandatory in August 2026, creates a clear timeline that is already influencing investment decisions and exit strategies.
Persistent Barriers to Investment
Beyond the complexities of the new AI regulations, European firms continue to grapple with a formidable set of operational and economic challenges. The EIBIS report highlights three dominant barriers that impede investment. The most cited obstacle is general uncertainty about the future, mentioned by 83% of firms. Close behind is the acute shortage of skilled labor, a critical issue for 79% of businesses, which directly impacts their ability to innovate and deploy complex technologies like AI. Finally, high energy costs remain a major impediment for 75% of companies, squeezing margins and diverting capital from strategic growth initiatives.
These challenges appear to be influencing long-term corporate outlooks. When asked about their plans for the next three years, EU firms showed a preference for replacement and modernization investments over expansion. Only 26% reported plans to expand their capacity, a figure that stands in stark contrast to the 37% of US firms with similar intentions. This cautious stance reflects the unique pressures within the European market. While concerns over customs and tariffs were a major obstacle for 77% of US firms, they were a less pressing issue for their EU counterparts (48%), further illustrating the different landscapes on either side of the Atlantic.
Shaping Future Growth and Competitiveness
The convergence of targeted industrial policy and landmark regulation is creating a distinct path for European corporate investment. Financial support from public institutions is actively channeling funds toward green technology and digital innovation, accelerating these transitions. Simultaneously, the EU AI Act is setting firm guardrails for the development of artificial intelligence, forcing companies to prioritize safety and ethics alongside profitability. The success of this dual approach will depend on striking a delicate balance.
Investors have expressed concern that overly burdensome regulation could inadvertently stifle innovation or encourage AI talent and capital to move elsewhere. The challenge for both policymakers and corporate leaders is to implement the new rules in a way that fosters trust without hindering the bloc’s innovative capacity. European firms are already demonstrating their resilience and commitment to key technologies. Their ability to successfully navigate this regulated digital landscape will ultimately determine their long-term competitiveness and shape the future of the EU’s single market for AI.