[DigitalToday reporter Jae-won Choi] Europe lags far behind the United States in investment in AI infrastructure and foundation models, but is rapidly securing competitiveness in the market for industry-specific AI application software, an analysis found. The strategy is to focus on software tailored to industrial settings rather than AI model development, which requires massive capital.

FinTech News Switzerland reported on Oct. 12 that McKinsey and European Software Network Boardwave said in a recent joint report that "Europe is emerging as a major hub in the global AI applications market."

The report said Europe accounted for 10 percent of 835 billion euros in global AI investment from January 2025 to June 2026. North America accounted for 71 percent and Asia 16 percent. In AI platforms and infrastructure, Europe’s investment was only 4 percent of the U.S. level.

The picture was different in application software. Europe’s AI applications investment was 11 percent of the U.S. level in 2018, but rose to 44 percent in the first half of this year. Investment reached 6.8 billion euros, close to last year’s full-year total of 8.1 billion euros.

Growth in vertical AI, which is specialised AI by industry, was even more pronounced. Funding raised by Europe-related startups rose from 9 percent of the U.S. level in 2018 to 67 percent in the first half of this year.

Investment was concentrated in six areas: industry, energy and climate; defence and security; transport and logistics; legal and compliance; healthcare and life sciences; and finance and insurance.

Representative companies include defence AI firm Helsing, legal AI firm Lectora, autonomous driving firm Wayve and software development platform Lovable. On average, they entered the top 100 European technology companies by valuation within 5 years of their founding.

Europe’s research capabilities, specialised talent and ecosystem for cooperation with large companies were also cited as growth drivers. In particular, last year saw a net inflow of technology and AI talent moving from the United States to Europe.

The report stressed that Europe should target the AI applications market based on industrial expertise and an understanding of complex regulatory environments to overcome its disadvantage in the foundation model race.