Cloud computing represents a key digital frontier. The technology stores and distributes data from giant data centers, requiring gigantic capital investments. In return, it unlocks giant efficiencies, lowers IT costs, and provides additional security for storing critical information. The next frontier of artificial intelligence computing depends on access to cutting-edge cloud.
Despite the high stakes, Europe and America risk engaging in a counterproductive, destructive cloud war. European concerns over data sovereignty, security, and vendor lock-in are mounting. A CEPA Bandwidth series will examine the conflicts and attempt to chart a win-win, constructive path forward.
US companies, led by Amazon Web Services, Microsoft Azure, and Google Cloud, dominate. Europe’s cloud computing market was worth around €87 billion in 2022 and is estimated to reach €200 billion by 2028. The three US-based cloud ‘Hyperscalers’ account for 65% of this market. EU cloud providers’ share decreased to under 16% in 2021, with the largest operator, Deutsche Telekom, capturing only 2% of the EU market. In addition, most European providers offer basic services in the form of infrastructure-as-a-service and depend on hosting or reselling hyperscalers’ platform services.
The cloud computing revolution is unleashing giant investments across the continent. In Finland alone, 22 new data centers are under construction. Google alone has invested €3.5 billion in its Finnish data center, making it the country’s largest foreign investor. Despite the threat of tariffs and an economic slowdown, the big cloud companies continue pouring money into cloud computing. Together, they reported almost $77 billion in capital expenditures for the first quarter of 2025.
The potential payback from these investments is equally gigantic. European governments enjoy an unprecedented opportunity to unlock up to €450 billion in annual fiscal savings by modernizing public services in the cloud.
It’s a true revolution. A decade ago, I ran government affairs for Google’s data centers in Europe. The cloud computing industry was nascent. Businesses still needed to be convinced that storing their data in far-off data centers was safer than in local hard disks. Governments still needed to be convinced that cloud computing could boost their economies. Since controversial cloud policy issues remained minimal, Google didn’t even deploy a full-time government affairs team to deal with the sector.
At the time, Google’s most significant challenge was explaining that installing and maintaining thousands of servers whirring away on stacks required hiring English-speaking plumbers and electricians rather than computer science PhDs. Many of the data centers under construction were located in old industrial regions, whose steel mills, coal mines, and paper mills had been hollowed out. Few feared excessive energy consumption, endangering privacy, or the sovereignty of the cloud provider.
These concerns have moved to the top of the tech agenda.
- Data Privacy: European governments are increasingly concerned about the location of their data and the potential for US authorities to access it.
- Data Sovereignty: European companies seek control over their data and the ability to ensure it is stored within the EU.
- US-EU Trade Tensions: Frayed transatlantic ties have led European companies to re-evaluate their cloud strategies and consider alternative providers.
- Energy Consumption: The International Energy Agency estimates that data centers (including those dedicated to AI) will consume over 800 TWh globally in 2026, double the amount in 2022.
European policymakers used to worry about becoming dependent on American suppliers. Transatlantic tensions have now expanded this concern into a fear that a US administration might use the continent’s reliance on American cloud services as leverage in trade negotiations – or even order the US providers to install a “kill switch” that shuts down their services.
In response, Google and Microsoft have attempted to reassure Europeans by boosting what they describe as “sovereign cloud” offerings. They are introducing new “data shields” and working with local European partners in sensitive industries. “Digital commitments” to Europe promise to contest any US government order to cease cloud services to European customers, including through the courts.
Although the promises have not eliminated European concerns, the unanswered question is whether real alternatives exist. Chinese cloud companies led by Alibaba might be capable, but they are required by law to share all data with Beijing. In his report on European competitiveness, former Italian Prime Minister Mario Draghi concludes that “the EU cloud services market is also lost largely to US-based players” and that “the EU’s competitive disadvantage will likely widen in the cloud market, as it is characterised by continuous and very large investments, economies of scale and the integration of multiple services offered by a single cloud provider.”
Several EU industrial alliances for cloud-based technologies and data exchanges have been created over time with various remits (Andromède, Gaia-X, Catena-X), but Draghi concedes that “results are minimal so far.” He concludes that the best solution is to work with US hyperscalers who offer reassurances, like Google and Microsoft. At the same time, European partners “retain control over sensitive elements of security and encryption.” These setups are not fully “sovereign” technologically. They are a second-best available option today for data security and territorial sovereignty. But they are the only reasonable choice.
William Echikson is a Non-resident Senior Fellow with the Tech Policy Program and editor of the online tech policy journal Bandwidth at the Center for European Policy Analysis (CEPA). Before joining CEPA, he worked at Google for six and a half years, running corporate communications for Europe, the Middle East, and Africa.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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