Why Europe Should Bet on Infrastructure
The GDP in Europe is stagnating. Growth has stalled across the largest economies, and the big question we need to ask ourselves is: “How do we want to turn this ship around?”
While everyone is talking about AI models and emphasising that it is super important to catch up with our own AI models, it is important to understand that this is not the only field we should focus on. It is not only about playing catch-up; it is actually about finding a field where Europe is strong and can build its own leverage against other countries in the world. I am strongly arguing that there is so much more to this than just the model layer. We as Europeans should put a strong focus on the infrastructure layer, because this is a field that is often forgotten but where the race hasn’t been decided, and where Europe has an edge (in talent, in university research, and in IP) and which is the layer that is urgently needed to build the best AI models in the world. Europe should be smart about which race it enters.
Where Europe Is Right Now
Europe is not in an amazing spot right now. We still don’t have our own big tech giants, we are far from AI leadership, defense spending is low, and GDP is stagnating.
This weakness didn’t appear overnight. GDP per capita at purchasing-power parity sits at around 72% of the US, with the productivity gap doing most of the explaining. Global medium-term growth is already forecast to run below its pre-2020 historical average, and Europe is underperforming within that.
The latest numbers don’t suggest a turning point. The IMF reported Q1 2026 growth of just 0.1% across the euro area and the EU. Germany managed 0.3%, France was flat, and Italy 0.2%.
The reason for the position we are in right now as Europeans is a decade of underinvestment in things like energy independence, physical infrastructure, defence capability, and the technology stack that increasingly determines whether an economy produces growth or imports it. This underinvestment in technology has led to the point where Europe has lost its competitiveness.
So we as Europeans really need to start working on how we make Europe competitive again. The next section deals with how innovation can be a big part of the solution.
Innovation as the Solution
Last year’s Nobel Prize in economics was a timely reminder. The winners, Howitt, Mokyr and Aghion, told us something important: sustained growth doesn’t happen automatically. For most of human history, stagnation was the norm. Growth became self-sustaining only when innovation was continuous, when new companies could displace old ones, and when the financial system channelled savings toward productive risk.
What this means is rather simple: if creative destruction isn’t happening, if we aren’t innovating, we can’t grow. We can’t export, and as a result we need to import and become dependent. As a consequence, our GDP struggles. And this is exactly what has happened in Europe over the last decade. We largely forgot how to innovate and how to build, which led to the loss of competitiveness we find ourselves in right now.
So the main question we need to ask ourselves is: How do we change that? How do we make innovation happen? And what kind of innovation should we focus on?
Europe’s Bet should be One Layer Down
Here is where it gets interesting. Everyone is talking about AI, and absolutely rightly so. AI is reshaping the global economy faster than almost any technology before it. But if you look at what the US is already committing to the model layer, we have to ask honestly: is that a race Europe can win? Or even should win?
Because what we seem to forget is that there is another race happening. A race that hasn’t received nearly the attention it deserves. One that doesn’t require Europe to copy anyone or to run after someone and try to play catch-up. An area where Europe already has the knowledge, the talent, and the industrial base to compete, and potentially even lead.
Let’s zoom out for a second. If you think about it, AI doesn’t start with the AI model. It rather starts at the complete opposite end. First you need the power. Then the grid to move it. Then the data centre to consume it. Then the chip to process it. Only then does the model exist.
Everything below the model is the infrastructure layer. And this race is what Europe needs to focus on!
Everything below the model is the infrastructure layer. And this race is where Europe needs to focus on!
The model layer is winner-take-most, and that race is probably already decided. (I am not saying that we should give up on that, there are more than enough good reasons to still build AI models.) But the infrastructure underneath those AI models is just as important, and the good news is that the race there is wide open. Grid engineering, industrial efficiency, energy generation, cooling, power electronics, these are things Europe knows how to build. I argue strongly that this is the field where we have a good shot, and where we need to focus.
The big infrastructure gap
Infrastructure is often called the backbone of the global economy. But this backbone is under a lot of pressure, more than at any point in recent history. BlackRock estimates $68 trillion in global infrastructure investment is needed by 2040.
The four mega forces driving demand:
AI and digital disruption pushing data centre and cell tower buildout
Energy security and rising electricity demand (notably: IEA estimates that air conditioning demand growth by 2030 could be roughly three times that of data centres)
Geopolitical fragmentation reshoring supply chains
Demographic divergence in developing economies
The institutional world is already waking up to infrastructure as an asset class. Assets under management in infrastructure funds have nearly tripled over the last ten years. Goldman Sachs puts $7.6 trillion into compute, data centres, and power alone between now and 2031.
The demand for infrastructure is large and the race hasn’t been decided yet.
Why Infrastructure Fits Europe
Focusing on infrastructure is not a plan that requires building from scratch, because the ingredients are already here.
Europe is home to some of the world’s leading technical universities, ETH Zurich, TU Munich, Delft, KTH, Imperial, and others. These institutions are producing world-class engineers and scientists in exactly the disciplines that the infrastructure layer demands: power electronics, materials science, energy systems, semiconductor design, mechanical engineering, and civil engineering.
The IP coming out of those universities is equally strong. Europe consistently punches above its weight in deep tech patents, in academic citations, and in the number of genuinely hard problems being solved at the research frontier.
And the track record is there too. Europe built Airbus and ASML, the company without which no advanced semiconductor can be manufactured anywhere in the world. It built Siemens, ABB, Vestas, and a generation of industrial champions that still define entire global markets. These were the product of a deep engineering culture, long-term capital, and the willingness to solve genuinely hard problems over genuinely long time horizons.
I believe that this culture did not disappear. It is still here, in the universities, in the research labs, in the thousands of deep tech startups quietly building across the continent. What has been missing is not the talent or the technology. It is the conviction, the ecosystem, and the capital to back it at scale.
Infrastructure capital is different. It is patient. It is debt-friendly. It is far more aligned with what our pension funds and insurance pools were built to fund than any frontier-model moonshot. It is a much better strategic fit.
The Art of Building the Flywheel
The question still to answer is this: how do we build the ecosystem that could produce a flywheel, one that makes sure economic growth keeps happening?
Believe in ourselves again. This might sound cheesy, but I honestly think it's true. We need to believe in ourselves first. Europe is not as far behind as we tell ourselves, or as a certain president is trying to tell us. We have the talent, the universities, the IP, and the industrial tradition. That is actually a lot. We shouldn't buy into the narrative that you need to leave.
Know where our strengths lie. We are not going to out-spend the US on frontier AI. But we can lead on the infrastructure layer underneath it — energy, grid, power electronics, industrial efficiency. That is where our knowledge base sits. That is where we should focus.
Take ownership. We can no longer point at governments and wait. Innovation and technology are the new politics. This is where real change happens. This is how societies move forward. We need to understand that it is in our hands.
Keep people here. Europe loses too much talent and too many companies to the US. We need more people building in Europe and staying in Europe, and we need to make that a compelling enough path that it is a genuine choice, not a sacrifice.
Build the flywheel. We need success stories. Founders who show that this is a real path, exits that recycle capital back into the ecosystem, a self-reinforcing loop. I believe this loop can give people a sense of purpose. Not anxiety about when the US or China will roll over us, but rather a feeling of strength, and the knowledge that we have it in our hands.
We Are Stronger Than We Think
Europe is not as far behind as we sometimes tell ourselves. We have the people, the knowledge, the capital pools, and the industrial tradition to compete seriously at the infrastructure layer of the AI economy. We just have not been pointing our attention or our money in the right direction.
The infrastructure layer is where Europe really has a good chance. It is where the numbers are largest, where Europe’s strengths are most relevant, and where the outcome is still genuinely open.
Let’s not feel intimidated. Let’s start building infrastructure technology here in Europe.