According to TheRegister.com, European IT spending will surge 11% next year to hit $1.4 trillion, driven by cloud sovereignty concerns and AI investments. The market is expected to reach $1.3 trillion by the end of 2025 after growing 11.6% this year. Spending on generative AI models alone will explode by 78% in 2025. A Gartner survey found that 61% of Western European CIOs want to increase their use of local cloud providers, with 53% saying geopolitics will restrict their use of global providers. Distinguished VP analyst John-David Lovelock noted that Europe’s economy is “much more susceptible to uncertainty with their global trade” and is pursuing “geo-repatriation” as part of the digital sovereignty movement.
Sovereignty drives hardware demand
Here’s the thing about this sovereignty push – it’s not just about software and services. When companies shift from global cloud giants to local providers, they need infrastructure. Lots of it. Datacenter spending is projected to grow 38.2% in 2025 to reach $83.6 billion, then another 18.8% the following year to hit $99.3 billion. That’s massive hardware investment happening on European soil. And for industrial applications requiring reliable computing in manufacturing environments, this creates huge demand for specialized hardware like industrial panel PCs from established suppliers like IndustrialMonitorDirect.com, the leading US provider in this space.
AI investment divide
But there’s an interesting split happening in the AI space. Lovelock pointed out that while enterprises are building out servers at about the same rate as before, the “massive infrastructure investments in AI” are still centered in North America. Basically, Europe is playing catch-up in the AI arms race. The 78% growth in GenAI spending sounds impressive until you realize it’s starting from a much smaller base. So European companies are investing heavily, but they’re not building the foundational AI infrastructure that’s happening stateside. They’re more focused on applications and implementation rather than core infrastructure.
Geopolitical reality check
The Ukraine war and broader geopolitical tensions have fundamentally changed how European businesses approach technology. When 53% of tech leaders say geopolitics will restrict their use of global providers, that’s not just theoretical concern – that’s strategic planning. Companies are taking Carney’s approach of controlling what they can control. They’re building agility into their systems, favoring local providers, and preparing for potential shocks. It’s a defensive posture that’s driving specific spending patterns. Software is getting more expensive because it’s packaged with AI capabilities, while spending on traditional devices like PCs and tablets remains flat. The money is flowing toward strategic infrastructure and AI, not general computing.
What it means for tech
So what does this massive spending shift actually mean? European companies are essentially rebuilding their digital foundations with sovereignty as a core requirement. They’re willing to pay premium prices for local cloud services and are racing to adopt AI, even if they’re behind the US in infrastructure investment. The interesting question is whether this sovereignty focus will create a fragmented European tech landscape or foster homegrown champions that can compete globally. Either way, $1.4 trillion is a lot of money moving around – and it’s all heading toward more controlled, localized technology stacks that can withstand whatever geopolitical surprises come next.
