Europe’s quiet strategic ascent: building the infrastructure for AI’s long-term future in 2025

While the US continues to dominate AI venture funding, Europe is emerging as a strategic hedge, investing heavily in foundational tech and infrastructure that could define AI’s sustainable growth in the coming years.

In the third quarter of 2025, global venture capital celebrated a remarkable surge, soaring to approximately $97 billion—a 38% increase year-on-year—with artificial intelligence (AI) firms commanding a near half share of this investment. The United States dominated the scene, pulling in around $60 billion, buoyed by headline-grabbing funding rounds such as Anthropic’s staggering $13 billion Series F and xAI’s $5.3 billion raise. These figures appear to reaffirm the conventional narrative that Silicon Valley is the epicenter of tech innovation, leading the charge into the future of AI and related sectors.

Yet a closer examination reveals a more nuanced and strategically sophisticated landscape unfolding in Europe, one that challenges the simplistic “Europe lags behind the Valley” trope. European venture capital raised €29.2 billion in the first half of 2025, with €10.1 billion—around a third—dedicated to AI, reflecting both the block’s robust ecosystem growth and a focus on foundational and scaling technologies underpinning AI’s deployment rather than pure moonshots.

Europe’s venture performance over three- and ten-year horizons quietly outpaces that of the U.S. and Asia, a feat attributed to lower entry valuations coupled with higher exit valuations driven by internationalisation. Greg Schmitt of MEAG characterises this as a classic multiple arbitrage effect increasingly evident in European deeptech and infrastructure bets. Over the last five years, Europe has witnessed an unprecedented injection of over €418 billion into its tech ecosystem, spawning more than 350 unicorns and nurturing over 3,200 new VC firms. However, the challenge remains that liquidity has not kept pace with this asset build-up, compelling a growing market in secondaries—a vital mechanism maturing rapidly in Europe.

Notably, Europe’s AI and deeptech playbook diverges from the U.S. strategy. While American investors concentrated tens of billions into a handful of AI labs, Europe adopted a diversified portfolio approach, strategically allocating roughly equivalent capital across infrastructure, deeptech, middleware, and logistics. This is exemplified by landmark funding rounds like the UK’s Nscale, which secured $1.1 billion in the largest Series B in UK and European history. Led by a mix of sovereign, corporate, and institutional investors including Aker ASA, NVIDIA, Dell, and Nokia, Nscale embodies a public-private partnership model aiming to build a European AI-native infrastructure backbone of data centres and GPUs. This initiative is bolstered by a significant expanded deal with Microsoft to supply some 200,000 Nvidia AI chips for deployment in Europe and the U.S., potentially generating $14 billion in revenue and marking a substantial step in creating sovereign AI infrastructure.

European quantum computing is also on the rise, with Finland’s IQM Quantum Computers closing a $320 million Series B round focused on error-corrected systems and U.S. expansion, reflecting Europe’s capacity to combine rigorous science with industrial scaling. Similarly, UK-based Paragraf aims to industrialize graphene electronics—another transformational but long-promised technology—backed by a strong investment consortium that signals confidence in tangible, scalable breakthroughs.

Meanwhile, Europe’s enterprise AI scene is maturing through companies like Omnea, Mimica, and DRUID AI, which focus on what might be described as the “plumbing” of AI—workflow intelligence and supplier relationship management systems that form the infrastructural veins of larger AI applications. These firms attracted substantial Series B and C financing from reputable global investors such as Khosla Ventures, Insight Partners, and Paladin Capital, highlighting a core strength distinct from the headline-grabbing research labs in the Valley. As Hemant Taneja of General Catalyst remarked, AI investors are navigating “peak ambiguity,” where foundational pipes and operational DNA matter more amid uncertain market dynamics than flashy model metrics.

Europe’s innovation extends even into sectors like climate logistics, with firms like London-based HIVED revolutionizing all-electric parcel delivery networks. Supported by NordicNinja and other investors, HIVED marries AI with electrification to improve urban logistics, underscoring that Europe’s tech renaissance is not confined to labs or cloud infrastructure but is also reshaping everyday services on the streets.

Government policy and industrial strategy reinforce these developments. The European Commission’s €10 billion public–private fund targeting AI, cybersecurity, and cleantech, alongside the €800 billion ReArm defense initiative, channel public capital to complement private investment, expanding Europe’s capacity but highlighting the ongoing challenge of nurturing more local growth capital. European policymakers and industry leaders alike stress the need for indigenous scale funding to retain and grow homegrown value.

For limited partners (LPs), the message is clear: the allure lies not in chasing the next sensational AI lab but in backing Europe’s quietly accumulating sovereign infrastructure, quantum technology, workflow intelligence, and climate logistics. These segments offer reset valuations, thinner competition, and genuine moats, presenting attractive investment opportunities. The rapid rise of secondary markets in Europe, handling stakes, fund vehicles, and company secondaries, illustrates an ecosystem moving toward liquidity sophistication, extending value capture beyond traditional exit paradigms.

Corporations are adjusting accordingly. The presence of Dell, Nokia, NVIDIA, and Aker in Europe’s biggest rounds signals a strategic pivot away from licensing the next AI model toward owning the operational pipelines integral to AI’s functionality and deployment. This marks a fundamental shift in control over value creation in the AI economy.

In summary, while the U.S. continues to anchor much of the AI capital, Europe’s Q3 2025 venture activity embodies a confident, deliberate strategy, eschewing a risky moonshot race in favour of building the foundational technologies and infrastructure that will sustain AI’s long-term growth. Europe, by all accounts, “didn’t get the memo” to play catch-up but instead is quietly, strategically constructing the world it will need to thrive—less noise, more signal, and a broad portfolio designed for the years ahead.

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Source: Noah Wire Services