The European Commission on Wednesday presented two new legislative proposals intended to expand the bloc’s domestic capabilities in cloud computing, artificial intelligence and semiconductor production. The measures - the Cloud and AI Development Act and Chips Act 2.0 - are framed as part of a broader push for technological sovereignty and an effort to narrow Europe’s gap with competitors in the United States and China.
Commission leadership framed the reform as a matter of operational security for critical infrastructure. "We cannot afford to depend on others for the technologies that keep our hospitals running, our energy grids stable and our services secure," Commission President Ursula von der Leyen said in a statement accompanying the proposals.
EU technology chief Henna Virkkunen underlined the risk of external control over services, warning of potential 'kill switches' that could disable or disrupt operations. "We want to be sure that in the critical fields we are always able to control the services and control the data in Europe," she told reporters, stressing the need for local control over technology and information in high-stakes sectors.
The Cloud and AI Development Act sets out sovereignty requirements for cloud providers operating in sensitive domains including banking, energy and healthcare. Those provisions respond in part to concerns about foreign legislation such as the U.S. Cloud Act, which can oblige U.S.-based companies to provide authorities access to data even when that data is stored outside the United States.
For critical public contracts, the proposal requires that vendors ensure software and hardware are manufactured within the EU, effectively excluding non-European control over specified data and services, EU technology officials said. Virkkunen noted that while these requirements affect a subset of services, they are particularly critical in areas such as defence, where European control of technology and data location is considered essential.
Market concentration among global cloud providers figures prominently in the Commission’s rationale. Amazon, Microsoft and Google together hold more than 60% of the global cloud market, a market structure the proposals aim to counterbalance through support for European alternatives.
Alongside vendor and procurement rules, the package includes measures to accelerate data centre deployment. Data centres that meet EU criteria would be eligible for a fast-track approval process, preferential access to power grids and reduced network charges when they use European-made chips and implement improved energy-efficiency measures.
Chips Act 2.0 complements the cloud and AI rules by promoting production of European-made semiconductors. One explicit target in the Commission’s plan is to double the EU’s global market share in semiconductors to 20% by 2030. The updated chips legislation encourages arrangements between manufacturers and buyers to secure future purchase commitments and provide demand visibility for producers.
Both the Cloud and AI Development Act and the updated Chips Act must still be negotiated with EU member states and the European Parliament in the coming months before they can be adopted into law.
Market reaction in listed cloud providers reflected investor attention to the proposals: Microsoft (MSFT) shares were quoted down 4.17%, Alphabet/Google (GOOGL) down 3.86% and Amazon (AMZN) down 1.81% in the coverage provided alongside the announcements.
Key points
- The Commission proposed the Cloud and AI Development Act and Chips Act 2.0 to reduce reliance on non-European technology providers and increase domestic production.
- The EU aims to raise its share of global semiconductor production to 20% by 2030.
- Proposals include sovereignty rules for cloud providers in sensitive sectors, fast-track approvals for qualifying data centres, and buyer-manufacturer agreements to secure future chip purchases.
Risks and uncertainties
- Negotiation risk - Both proposals must be approved by EU member states and the European Parliament before becoming law, creating uncertainty over final scope and timing. Affected sectors: regulation, cloud services, semiconductors.
- Market concentration adjustments - New procurement and sovereignty requirements could alter competitive dynamics for major cloud providers, potentially impacting contracts and market share. Affected sectors: cloud providers, enterprise IT.
- Implementation complexity - Fast-track approvals, grid priority and incentives for EU-made chips require administrative and infrastructure coordination, with potential delays or uneven rollout across member states. Affected sectors: data centres, energy, chip manufacturing.