Why technology is the cornerstone of European strategic autonomy

As Europe aims to grow its economy while safeguarding its own interests, it is placing greater focus – and investment – in areas ranging from defence and manufacturing to energy, food and health. There is one sector, however, that stands out as the cornerstone of European strategic autonomy: technology.

Whether it is artificial intelligence, defence, communications or space exploration, technological capabilities enable a country or region to innovate, remain competitive, defend itself and maintain economic independence. This is shaping not only European policy but also presenting significant opportunities for investors across the European tech sector.

AI and digital sovereignty

Strategic autonomy includes securing digital infrastructure, protecting data, and reducing reliance on external suppliers and manufacturers of technological equipment and components. 

European policymakers are taking decisive steps to address this - the European Union Chips Act, for example, aims to double Europe’s market share in semiconductors to 20%, increasing the bloc’s competitiveness and at the same time reducing the potential for supply chain disruption.¹

More recently, other initiatives have included the 2025 AI Continent Action Plan, which aims to make Europe a global leader in AI. It includes proposals for large-scale AI data centres and computing infrastructure, as well as increasing access to high quality data, fostering AI adoption in strategic sectors and strengthening AI skills.²

Also in 2025, the European Commission launched InvestAI, an initiative to mobilise €200 billion for investment in AI, including a new €20 billion fund specifically for gigafactories.

European semiconductor equipment companies involved in lithography and deposition – key steps in building microchip circuits – are potentially positioned to benefit from growing demand for high-performance computing and AI hardware. As AI models grow in complexity, demand for these advanced manufacturing tools will surge, creating further potential investment opportunities.

Photonics, used in fibre optic communications, laser cutting and environmental sensors, is another area where European companies excel, driven by the need for faster, more efficient data transfer.

AI has the capability to revolutionise industries from healthcare to finance and while US tech giants have dominated the sector, Europe boasts several companies which we believe are well placed to be among the leaders of AI technology development. 

From semiconductor equipment manufacturers to software providers, as well as companies involved in building infrastructure such as data centres – and related services such as generating the power needed to run them – there are a myriad of potential investment opportunities.

Tech as a key aspect of defence

Cutting-edge technology is also a key part of defence. For example, an advanced military aircraft relies heavily on the latest chips, sensors, and AI systems. Without access to state-of-the-art components, Europe cannot produce or maintain competitive military hardware, which is critical for national security and independence.

EU defence spending was projected to reach a record €380 billion to €390 billion in 2025 – an 11% increase from 2024’s level, and almost double 2020’s spend.³ This could be set to accelerate further – consultancy McKinsey predicts that European defence spending could approach €800 billion by the end of the decade. ⁴

In addition, more than one-fifth of the world’s clean technologies are developed in the EU, and Europe is a world leader in the development of wind turbines, electrolysers and low-carbon fuels, according to the European Commission.⁵

And looking further beyond – or upwards – the space sector has become a strategic frontier, for both interconnectivity and security, creating potential new investment opportunities. Europe is planning to develop a constellation of some 290 satellites, known as IRIS², which has a range of uses including communication and connectivity, crisis management, security and defence while also enabling many commercial applications across transport, energy, banking, healthcare and more. ⁶

As space becomes more accessible and commercialised, European companies that can provide innovative solutions - such as satellite manufacturing, launch services, or space data analytics – could possibly stand to benefit.

A long-term strategic journey, driven by tech

Achieving European strategic autonomy in technology involves navigating complex political and national interests across a bloc consisting of multiple countries. For example, Germany is proposing its own €10 billion military satellite network, which has drawn criticism of duplication and weakening defence coordination, according to reports.⁷

However, national and Europe-wide initiatives can co-exist and act together to strengthen the region’s overall technological resilience, and for investors, this could offer both national and pan-European level opportunities. 

However, Europe is undeniably lagging behind the US when it comes to technological advancements and investment. A study by the University of Stanford estimated that between 2013 and 2025, the US attracted some $757 billion in private AI investment, dwarfing that of Europe – for example, Germany attracted $17 billion and France $16 billion.⁸ This year in the US, four of the so-called hyperscalers – Amazon, Meta, Microsoft and Alphabet – are expected to spend more than $600 billion in capex.⁹

However, the current market environment presents a more attractive valuation landscape in Europe. Many European tech companies are trading at lower multiples than their US counterparts. This means they can potentially offer investors a cheaper entry point into the sector, but with good potential for growth, as well as offering diversification opportunities away from US tech stocks.

Europe’s journey toward strategic autonomy is driven by technology. By reducing dependencies on external suppliers and third parties, the region can move towards securing its economic and security interests. Governments are increasingly supportive, offering incentives and funding to foster innovation.

For investors, this presents a range of potential opportunities in areas including defence, satellite technology, AI, digital infrastructure and more, with European tech stocks offering potentially attractive valuations, long-term growth prospects and the potential for financial returns, as well as enabling investors to participate in shaping Europe’s future.