A new age of capital: growth, sovereignty and AI
The ECB warns Europe risks missing AI-driven growth as investment flows to the US, urging faster adoption to boost productivity and public finances amid demographic pressures.
In the 19th century, European capital financed transformative technologies like railways and the Suez Canal, but after the 1873 crash, growth shifted to the US. Today, European savers hold €440 billion in US tech firms, with AI investment again flowing abroad. The ECB questions whether Europe will secure benefits this time, stressing the need for domestic AI development rather than reliance on imports.
Euro area firms plan to allocate 10% of total investment to AI in 2026, with AI-related borrowing driving a quarter of credit growth in early 2026. Worker adoption has surged, with over 50% of euro area employees using AI—achieved in two years compared to a decade for the internet. Yet the US outpaces Europe, with digital investment growing twice as fast and workers spending two to three times more time using AI.
Europe faces a €100 billion annual shortfall in public investment due to ageing populations and strategic needs. AI could lift productivity by up to 4% over a decade if adopted quickly, potentially covering a third of the fiscal cost of Europe’s strategic investments, according to ECB estimates.
US tech firms issued over $100 billion in bonds last year to fund AI expansion, with long-term yields rising partly due to this borrowing. Europe, dependent on US tech, may bear higher borrowing costs without sharing in the growth, as the US dominates AI model production and computing capacity, hosting 75% and 95% respectively.