With industries embracing this evolving technology, Europe is determined not to be left behind, and dealmakers are paying close attention
Europe’s artificial intelligence industry is gaining traction but has struggled to step out of the shadows of the US’s ongoing sprint for global supremacy. Illustrating this dominance, AI-first companies globally attracted US$110 billion in venture capital in 2024, with the US claiming 74 percent of it. Europe’s portion—US$12.8 billion—reflects steady progress but highlights a stark investment gap.
Nevertheless, Europe’s AI market is accelerating. Statista projects it will reach US$58.1 billion in 2025, climbing to US$235.5 billion by 2031, with a compound annual growth rate of nearly 26.3 percent. Adoption is surging too: Eurostat reports that 13.5 percent of EU enterprises with more than ten employees used AI technologies in 2024, up from 8 percent one year prior. This leap signals growing confidence in AI’s transformative potential across industries.
The UK is the region’s AI powerhouse, ranking third globally behind the US and China. Valued at US$92 billion in 2024, the UK market hosts more than 3,700 AI companies, which contribute £5.8 billion (US$7.7 billion) to its economy. The country’s most recently minted tech unicorn, Cera, uses AI to monitor patients' health, predict potential health issues and coordinate care services efficiently.
Beyond the UK, France and Germany are emerging as key contenders. France’s AI sector, bolstered by startups such as large language model developer Mistral AI, is gaining traction, while Germany’s industrial giants are embedding AI into all things manufacturing and logistics, driving practical, sector-specific innovation.
Governments are stepping up to ensure that Europe is not left behind in this tech revolution. The European Commission’s InvestAI initiative is funneling US$207 billion into AI development, pairing public and private funds to spur growth. The UK’s AI Opportunities Action Plan, launched in January 2025, has secured at least US$14.3 billion in commitments from tech companies to strengthen data center infrastructure. Meanwhile, taking a cue from the US’s US$500 billion Stargate project, French president Emmanuel Macron announced in February a €109 billion (US$122 billion) investment plan, which includes a €30 billion to €50 billion (US$33.5 billion to US$56 billion) pledge from the United Arab Emirates to build Europe's largest AI data center in France.
Deal surge
This continent-wide race for AI dominance is fueling a dealmaking boom. Mergermarket data shows that European M&A value is soaring, even as deal volume has dipped slightly—a trend that mirrors the overall tech sector. In 2023, 49 AI deals totaled $480 million, while in 2024, 45 deals more than doubled that figure, to US$1.1 billion. The pace has accelerated again in early 2025: The first quarter recorded ten deals worth US$160.8 million, doubling Q1 2024’s five deals worth a combined US$54.5 million.
Advanced Micro Devices was behind for Europe’s largest AI deal to date. The US chipmaker acquired Finland’s Silo AI for US$665 million, tapping its expertise in custom AI models and its enterprise clients.
The second-largest deal was a US$100 million Series C round led by Eurazeo for Cognigy, a German customer service startup. The funds are intended to accelerate the company’s international expansion and the development of its platform, which uses conversational and generative AI to automate customer interactions for major global brands.
In 2025, February saw London-based Luminance raise US$75 million in a Series C led by Point72 in the biggest deal of the first quarter. The investment addresses the growing need for efficiency in corporate legal departments that face rising workloads, but not proportional headcount increases. Luminance tackles this by using its specialist AI, trained on vast legal datasets via its own large language model, to automate complex contract analysis, drafting and negotiation workflows.
This is only scratching the surface, since these headline figures only capture direct AI tech deals. AI’s true impact can be felt far and wide, driving M&A across sectors from healthcare to finance, shaping high-profile transactions. Consider Thoma Bravo’s £4.3 billion (US$5.7 billion) take-private of Darktrace in April last year, one of the year’s standout PE buyouts. The UK cybersecurity company uses unsupervised machine learning at the core of its product suite to understand businesses’ network behavior and identify deviations and anomalies that indicate potential threats.
Equipping to compete
The strength of the AI dealmaking market stems from fierce competition among businesses to achieve productivity and efficiency gains, as well as untapped growth opportunities, by innovating in their products and services. It is also driven by financial sponsors’ appetite to seize upon the next growth frontier and the potential for highly scalable returns.
Companies are acquiring cutting-edge technology to stay relevant. Generative AI, which powers tools like chatbots and content creation platforms, has been a hot target, as seen in Cognigy’s funding. An emerging area, meanwhile, is agentic AI. These autonomous systems go beyond reactive AI by proactively adapting to complex, dynamic environments and collaborating with humans or other software systems. AI agents are capable of independent reasoning, decision-making and task execution to achieve specific goals, such as optimizing supply chain logistics by rerouting shipments to avoid delays or executing real-time financial trades to maximize portfolio returns based on market conditions.
Another driver of acquisitions among companies is the scarcity of AI talent. “Acqui-hiring,” in which big tech businesses are snapping up European researchers to bolster their labs, is fueling activity. For example, Microsoft paid US$650 million in March last year to secure licensing to Inflection AI’s models, simultaneously onboarding its team. The deal included hiring the company’s co-founders, Mustafa Suleyman and Karén Simonyan, primarily to enhance its agentic AI development for applications in logistics, finance and consumer products.
Europe possesses a notable edge in AI talent. The region boasts a per-capita concentration of AI experts that surpasses that of the US by 30 percent and nearly triples that of China. World-class research is led by institutions like the University of Oxford, ETH Zurich and France’s Inria. London, Berlin and Amsterdam are magnets for AI startups, offering diverse talent pools. However, retaining this talent is tough—many top researchers are lured to US tech giants offering higher salaries. Initiatives like Germany’s AI Strategy, which funds 100 new AI professorships, aim to stem the brain drain.
Speed bumps
The road ahead is not without speed bumps. The EU AI Act, effective in stages beginning in 2025, aims to create “trustworthy AI” with supportive policies. Strict rules on high-risk systems and general-purpose AI models create compliance costs and potential operational limits. For instance, companies must conduct risk assessments for AI in fields including healthcare, retail finance and hiring, which could slow deal timelines. In addition, there is a lack of clarity in many of the act’s definitions and requirements, and regulators have been slow to issue formal guidance. This has made it challenging for companies to accurately assess the compliance risks they face.
ESG concerns add further pressure. AI’s energy-intensive models and data centers clash with Europe’s net-zero goals, while ethical data use and algorithmic bias raise governance questions. The EU and member state regulators tasked with enforcing the act will likely scrutinize cross-border M&A for compliance, adding further complexity to deals.
However, the broad direction of travel is clear. Strategic necessity, robust investment appetite and Europe’s deep talent pool are building deal momentum. Expect more consolidation, private equity engagement and cross-border transactions as companies chase best-in-class tech and talent to ensure a seat at the AI innovation table.
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