Europe Funds America's AI Boom at Its Own Expense

European households have invested approximately €440 billion in US technology companies, according to Christine Lagarde, President of the European Central Bank. This investment is financing America's artificial-intelligence boom, while Europe risks missing out on the resulting growth and potentially facing higher borrowing costs.

Lagarde compared this situation to European investors funding American railways in the 19th century, with most economic benefits remaining in the US. Large US technology companies issued over $100 billion in bonds last year as they sought to build AI infrastructure, which can push up financing costs beyond America due to European interest rates following US yields.

Rapid AI adoption could increase European productivity by as much as four percent over the next decade, according to Lagarde. However, the US hosts approximately 75% of global AI computing capacity, compared with only five percent in Europe. This reliance on foreign technology for banking, healthcare, transport, and public administration could give overseas providers political or commercial leverage.