The quiet revolution in European Tech -- and how it could shake the global cloud market

The reaction to U.S tariffs last month was almost instant. Across the whole world, markets were sent into a frenzy, and very few sectors -- if any -- escaped unscathed. Tech moves faster than most sectors at the best of times, so it’s no surprise that commentators are still trying to assess the impact of ‘Liberation Day’ on the future of the cloud, AI, and countless other industries. 

GPU shortages had already become a severe problem for many businesses beginning AI projects, and it’s possible that uncertainty around tariffs will cause further delays. On top of this, the Trump administration has suggested it may adjust the Biden era Framework for Artificial Intelligence Diffusion due to come into force mid-May, further calling into question exactly how global supply chains for IT hardware will look this time next year.

One emerging trend does seem to be clear: European governments and businesses are rethinking their relationships with large U.S.-based providers. According to new research from Civo, 84 percent of UK IT leaders are concerned that the latest round of tariffs could inhibit their control over and access to their data.

The feeling is that American firms could now at any time pass on the US tariff impact on their hardware to their customers, be subject to substantial European tariffs, or fall afoul of other changes to the rules and laws governing multinational tech businesses.

This could potentially lead to price fluctuations and an inability to be certain about the integrity of sensitive data. As such, a process of derisking by reducing dependency on U.S hyperscalers is quietly underway, and gaining pace. The Dutch parliament very recently asked its government to move away from US cloud providers.

The hyperscale response has been swift. At the end of last month, Microsoft announced a new set of European digital commitments, including guarantees to defend Europe’s data privacy and uphold its digital resilience. 

In many ways, this is a positive step. It’s good to see Microsoft at least appearing to treat the concerns of its European customers seriously. Hyperscalers are well placed to provide investment in Europe’s tech ecosystem, create jobs, and meet certain businesses’ needs. The company clearly recognizes the swell in support for sovereign cloud and AI solutions, and is keen to allay customers’ concerns by promising to protect the privacy of European data. 

However, this is unlikely to be enough for European governments and enterprises. Leaving aside the tariff risks, existing legislation makes U.S hyperscalers’ promises of privacy legally impossible to guarantee. The CLOUD Act, introduced during Donald Trump’s first term as President, effectively requires U.S providers to share any data with US law enforcement on request, regardless of where that data originated, or where it’s stored. 

Data residency is another way hyperscale providers have attempted to ease privacy and sovereignty concerns in the past, with Google announcing UK data residency as far back as last October. Once again, though, IT leaders are increasingly alert to the differences between data residency (where data is stored in a country but can still be transferred globally and subject to other jurisdictions) and data sovereignty.

If European organizations cannot currently turn to the U.S for true data sovereignty, then the continent must build its own cloud and digital infrastructure. There is already a healthy list of business initiatives and government projects taking on this challenge, particularly in the EU. 

EuroStack, an informal group of academics, policymakers, and business leaders dedicated to boosting Europe’s sovereign digital infrastructure, is less than a year old, but its ideas are gaining significant traction in the space. Another example is Open Euro LLM -- a joint project from a range of businesses and research institutions from across the continent to advance open-source, EU-compliant language models. 

The Open Cloud Coalition (OCC), founded last year, is another advocacy group pushing for a resilient, competitive cloud market. Made up of businesses across the UK and EU, the OCC focuses on advocating a pro-competition cloud environment and a concrete strategy to promote open source projects -- especially where public money is used. Enthusiasm for these kinds of projects has been steadily gaining pace for the last 12 months, and April’s tariffs seem to have turned a jog into a sprint.

The UK is falling behind. The OCC’s membership includes a healthy and growing number of British firms, but other efforts to replicate similar groups have been few and far between. This isn’t for lack of appetite, and many of us have been advocating in this direction for some time. British businesses are just as concerned as their continental counterparts about the direction of travel for U.S tech, with Civo’s research finding that over 61 percent of UK IT leaders now consider sovereignty a strategic priority, but this feeling has yet to translate into action on the same scale. 

There has also been disappointment with the direction of travel among policymakers. Many saw the new government’s election last year as a chance to reset Britain’s relationship with the U.S when it comes to tech, but it will have its work cut out to break the stranglehold of Big Tech and create opportunity for British providers and businesses. 

Huge contracts have been awarded to the dominant cloud providers, AWS and Microsoft. Although the CMA’s investigation into the UK cloud services market has made a provisional recommendation to refer AWS and Microsoft to the Digital Markets Unit, we won’t know the outcome until Summer. Although the latest trade agreement between the UK and the US didn’t directly mention the Digital Services tax, those talks are ongoing, and the tax is rumored to still be on the table. If cut or scrapped, this will only serve to strengthen hyperscalers’ control over the UK’s cloud and AI markets at the expense of our homegrown industry.

In the UK, as in the rest of Europe, it’s possible that all these factors will solidify enterprises’ resolve. Sovereignty has become a strategic imperative for many in the last 18 months, and tariffs are simply accelerating this trend. By establishing truly sovereign initiatives, with funding and support from public bodies, Europe’s digital economy can chart a different path to the United States, which recognizes the benefits of international collaboration, whilst also insulating both users and providers from international shocks.

Mark Boost is CEO at Civo, the UK HQ-ed cloud provider.