Oxford Economics' projections indicate that over the six years following 2021, US business investment growth is set to more than triple that of Europe, with artificial intelligence increasingly widening the economic divide between the two blocs. The consultancy forecasts that from 2021 through the end of next year, real US investment in new equipment and facilities will expand by 40%. The surge in AI-related capital spending is identified as the core driver behind this projection. In contrast, the eurozone is expected to see only a 12% increase in real investment over the same period, while German business investment is nearly stagnant.

These figures underscore the challenge facing Europe as it struggles to keep pace with America's explosive growth in high-tech equipment and infrastructure spending. European IT investment was already lagging behind the US well before ChatGPT's debut in late 2022 and the subsequent rise of the large language model wave. However, America's heavy bet on AI carries its own risks. Institutions such as the Bank for International Settlements (BIS) have warned that the high level of spending raises the risk of a costly "investment bust." Google, Meta, Microsoft, and Amazon are rapidly expanding their AI infrastructure, with combined capital expenditures from these four firms alone projected to exceed $725 billion in 2026.

Oxford Economics' data also shows that Europe has made virtually no progress in narrowing its investment gap with the US since former European Central Bank President Mario Draghi published a landmark report on European competitiveness in September 2024. Draghi had warned that digital transformation, decarbonisation, and increased defence spending would require a "unprecedented" wave of investment in Europe, with spending levels needing to return to those seen in the 1960s and 1970s. He suggested the required new investment would even surpass the scale of the Marshall Plan after World War II.

Oxford Economics economist Daniel Hallenberg noted: "The US economy is more dynamic and has a strong entrepreneurial culture, so it is moving faster and reaping greater rewards in the AI race. Europe's pace is far slower." The productivity gap between Europe and the US is also widening. Bart van Ark, a professor at the University of Manchester, told ECB officials at the Sintra ECB Forum this summer: "The US has pulled further ahead of Europe recently." Van Ark's analysis shows that between 2018 and 2025, US GDP per hour worked increased by $14, while Europe saw only a $2 gain. He added: "This gap is not confined to the digital sector alone." America's advantages are also evident in areas such as wholesale and retail trade and professional services.

However, van Ark believes that simply increasing investment will not be enough to solve Europe's productivity problems. The "deeper issue" in Europe is that innovations are not smoothly integrated with the practical adoption of new ideas and tools by companies across various industries. ECB President Christine Lagarde warned in a speech last year that Europe's growth model, which is heavily reliant on manufacturing, is suited to an era that is gradually fading away. Europe is also one of the first regions to implement strict AI regulation. The European Commission has stated that the Artificial Intelligence Act, which took effect in 2024, is the world's first comprehensive AI legal framework. Critics warn that heavy-handed regulation will stifle innovation and deter AI investment.

French President Emmanuel Macron noted in a speech two years ago: "We are already falling behind in a rapidly changing world," cautioning that Europe suffers from "over-regulation and under-investment." Carsten Junius, chief economist at Swiss bank Julius Bär, remarked: "Europe has already missed the boat on this wave of cutting-edge technology." Still, the US investment boom is heavily dependent on sustained AI spending. If returns fall short of expectations, a correction could easily follow. The BIS, which advises central banks, warned in June that if AI spending does not deliver expected returns, a prolonged "investment bust" could occur. Junius believes that a significant portion of the US-Europe investment gap is at least partly cyclical. "US AI investment cannot remain at its current scale indefinitely," he said, pointing out that the IT and semiconductor sectors have historically experienced investment cycles and will continue to do so.

Yet Europe's own shortcomings in innovation capacity and slow adaptation further amplify its disadvantages. Junius attributes part of the problem to rigid labour markets. He warned: "If Europe cannot catch up in frontier technologies, our standard of living relative to the US will continue to deteriorate."