Europe’s greatest firms are predominantly present in “old” industries. It’s a pattern we first noticed in our inaugural Fortune 500 Europe checklist final yr, the place the highest 10 is dominated by fossil gas giants, automotive and finance.
That doesn’t examine favorably with the U.S. checklist, the place dynamic tech and pharmaceutical companies grapple for the highest spot alongside retail teams, and even hybrids of tech and retail, specifically Amazon.
There are simply 15 tech firms on this yr’s Fortune 500 Europe, in contrast with 49 within the U.S. American tech firms account for 5x extra income on the checklist in contrast with these in Europe.
That explains among the massive income hole between the lists. The U.S. Fortune 500 firms amassed $18.8 trillion in revenues final yr, in contrast with $14.5 trillion for Europe’s titans.
Whereas the early winners of the AI growth—NVIDIA, Microsoft, and Google—have been discovered on the western aspect of the Atlantic Ocean, legacy companies are rapidly realizing the alternatives of automation.
“There is so much potential…”
Mark Learn OBE, CEO of WPP
Peter Oppenheimer, Goldman Sachs’ chief international fairness strategist and head of macro analysis in Europe, instructed Fortune earlier this yr the most important winners of AI might be the businesses that leverage the know-how quite than these at its leading edge, akin to the canal growth of the 18th century.
Amid a widening hole between AI gamers within the U.S. and the remainder of the market, and CEOs’ ongoing tussles over regulation in Europe, companies on the continent leveraging AI to search out efficiencies characterize the most effective probability of Europe closing the hole with the States.
However the race is on. In his 69-page EU competitiveness report, former ECB president Mario Draghi identified that European productiveness diverged from the U.S. within the Nineteen Nineties because of a failure to “capitalize on the first digital revolution led by the internet.”
To keep away from falling behind within the newest AI-based revolution, vertically integrating tech in Europe’s industries can be key, Draghi says, and so they must be fast.
“The question for European companies is how they can leverage AI more aggressively, regardless of its origin. There is so much potential for them to take advantage of the billions of dollars being invested globally,” Mark Learn OBE, CEO of communications firm WPP, instructed Fortune.
Jason Alden/Bloomberg by way of Getty Photographs
Europe’s AI adopters
The debut of the inaugural Fortune 500 Europe checklist in 2023 got here as companies had been beginning to come to phrases with the implications of the arrival of ChatGPT. Giant Language Fashions (LLMs) allowed each member of a family to make the most of the know-how, offering them with the primary actual understanding of its capabilities.
“The topic [of AI] in itself is not new,” Florian Mueller, EMEA head of AI observe at consultancy Bain & Co, instructed Fortune.
“I think what has changed, and ChatGPT probably marks the real moment of change, is that the velocity of adoption has dramatically increased.”
Mueller provides that, in contrast with earlier technological revolutions, implementing AI in a company is comparatively inexpensive.
Early proof would counsel Europe’s greatest hitters don’t wish to be left behind within the newest technological revolution.
Mueller says that historically, AI implementation was usually the remit of industries already dealing with plenty of information, for instance, firms working in information communications, banking, and insurance coverage.
He added that the broad tech integration within the final two years has been present in Gen AI.
“Whether it’s using it for software development, for customer assistance, whether it’s supporting knowledge workers in their processes, a lot of uptake in the marketing space. All of those you see literally across the board.”
Volkswagen, the chief of the Fortune 500 Europe in 2024, introduced in January that it had launched an AI firm, following the introduction of ChatGPT to its automobiles at the beginning of the yr.
A number of carmakers are utilizing LLMs as in-car assistants, whereas AI is creating the bedrock for a possible way forward for autonomous driving.
Shell, a predominately fossil fuel-based firm based practically 120 years in the past, has additionally embraced using AI throughout its operations. The corporate makes use of reinforcement studying to assist optimize its drilling operations, has partnered with C3 AI to develop predictive upkeep capabilities, and used machine studying for stock and demand forecasting.
The pharmaceutical sector, which boasts Fortune 500 Europe hitters like Roche Group, Novartis, and Sanofi, is rapidly leveraging AI in cutting-edge drug discovery.
The shift, Mueller says, has created a conflict for expertise as non-tech firms battle to recruit information scientists and machine studying engineers to assist remodel their operations.
Jeenah Moon/Bloomberg by way of Getty Photographs
Is it actual?
The proliferation of AI adoption was met with fanfare amongst buyers, who cheered firms’ enthusiasm for tech that promised to spice up productiveness. This early within the sport, although, there aren’t but many examples of this funding translating into important returns on funding.
Europe’s banking sector may be the earliest instance of an business that can use AI to boost profitability.
Evident, an intelligence platform, has drawn up an index of worldwide banks ranked by their AI preparedness ranges, breaking it down by expertise, innovation, management, and transparency. Inevitably, European firms fall behind American ones who put the foundations in place for the AI transition early.
Alexandra Mousavizadeh, co-founder and CEO of Evident, says Evident picked the banking sector for example of uptake as a result of it represented “mammoth organizations that were going from legacy to trying to become AI first,” and was utilizing AI in roles throughout its group.
European banks, together with HSBC and Spanish group BBVA, had been among the many highest Fortune 500 climbers within the final yr. However for different firms which were sluggish to introduce autonomous techniques and rent the sharpest new AI expertise, the window of alternative is closing.
“When it really comes down to ROI in the next 18 months, they’re just going to pull ahead. And when that starts, the game is over,” Mousavizadeh instructed Fortune.
Startup DeepL gives translation providers for half of the U.S. Fortune 500. David Parry-Jones, DeepL’s chief income officer, says there may be a whole lot of noise round LLMs which have made rollout tougher throughout organizations.
“The promise is obviously dramatic on the basis of what these things could do, but the reality of implementation within a large enterprise is not the same,” Parry-Jones instructed Fortune.
Krisztian Bocsi/Bloomberg by way of Getty Photographs
Regulatory hurdles
A number of CEOs, together with Spotify co-founder Daniel Ek, have warned of regulatory variations between Europe and the U.S. that would trigger Europe to overlook out on the newest technological revolution.
Talking to the FT earlier this week, Nicolai Tangen, the CEO of the $2 trillion Norwegian oil fund, summarized: “In America, you have lots of AI and little regulation, and in Europe, you have little AI and lots of regulation.”
Creating, launching, or simply utilizing know-how is tougher in Europe than it’s anyplace else on this planet.
Matt Brittin, EMEA president for Google
Matt Brittin, Google’s EMEA president says, in some ways, Europe is in a wonderful place on AI.
”It has a well-educated workforce and a single market, which might assist new innovation scale and profit everybody quickly. Nevertheless, as Mario Draghi’s report final month discovered, the EU is falling behind its international counterparts in the case of innovation,” Brittin instructed Fortune.
Brittin agreed {that a} explicit problem within the EU was the extent to which regulation on AI was carried out within the area.
“Over the past 5 years, we’ve seen over 100 new legal guidelines that have an effect on the digital financial system and society. After all, there should be clear guidelines of the highway, however these guidelines are sometimes conflicting, untested, and inconsistently carried out.
“Put simply, developing, launching, or just using technology is harder in Europe than it is anywhere else in the world. To stay in the global race, the EU needs a new approach: mitigating the risks of new technology while enabling innovation.”
