In early June 2025, the European Union officially acknowledged what many within the tech industry have long understood: full digital sovereignty, particularly in relation to U.S. technology dominance, is not currently achievable. This marked shift came through the unveiling of the European Commission’s International Digital Strategy, which openly stated that "decoupling is unrealistic" and that deeper cooperation across technological value chains is the necessary path forward (Politico.eu, 2025-06-04).
A Reality Check for European Ambitions
Over the past several years, Europe has positioned digital sovereignty as a core strategic goal. The appointment of a Commissioner for Tech Sovereignty in 2024 reflected this political momentum. However, the structural limitations have become increasingly difficult to ignore. U.S.-based cloud providers currently command over two-thirds of the EU market, European startups lag behind in scaling artificial intelligence solutions, and Europe’s share of global semiconductor production remains below 10% (Politico.eu).
Moreover, the Commission’s own documentation cites Europe’s "failure to capitalise on the digital revolution" and explicitly acknowledges the U.S.'s "superior ability to innovate." These admissions represent a sobering departure from previous rhetoric, which aimed to foster a self-sufficient digital ecosystem within the EU.
Strategic Recalibration, Not Retreat
Importantly, this is not a wholesale abandonment of the digital sovereignty agenda. Instead, it is a recalibration based on current industrial realities. The new strategy outlines a dual-pronged approach: targeted investment in strategic capabilities and robust cooperation with trusted allies. Areas highlighted include quantum computing, sixth-generation (6G) telecommunications, artificial intelligence, and cybersecurity infrastructure.
Notably, the strategy emphasizes joint EU-U.S. efforts in semiconductor research, as well as the development of AI-optimized supercomputing platforms. It also signals that future tech partnerships will focus on secure and transparent value chains rather than exclusive national control.
Implications for Strategic Investors
From an investment perspective, this shift creates a more predictable and partnership-friendly environment. For funds like Mercaton Investment Group, the European pivot opens up multiple strategic corridors:
Dual-use digital infrastructure: Systems that support both civilian and defense applications will benefit from EU funding and regulatory support.
Public-private partnerships in deep tech: Areas such as quantum and edge computing will be developed through cross-border collaborations.
Cybersecurity and AI ventures: Selective autonomy in these sectors remains a priority, especially in sectors tied to national resilience.
This shift also aligns with the evolving nature of industrial policy in Europe, where resilience is no longer synonymous with isolation, but with diversified, interoperable networks.
A Mature Strategy for a Multipolar World
The EU’s pragmatic stance marks a maturation in how it navigates the digital economy. In place of an all-or-nothing model of technological independence, the Union now pursues a strategy of selective sovereignty. This means doubling down on areas where it can build leadership, while strategically cooperating where dependencies are unavoidable.
This is particularly important in an era of intensifying U.S.-China competition, where middle powers like the EU must balance innovation with alignment. By pivoting toward collaboration, Europe can better leverage its academic, regulatory, and industrial strengths while tapping into allied innovation ecosystems.
At Mercaton, we believe this framework creates fertile ground for robust returns and geopolitical relevance. Investors who understand the nuances of this strategy—and who can identify ventures positioned at the intersection of resilience and scalability—will be best placed to thrive.
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