Europe’s greatest firms are predominantly present in “outdated” industries. It’s a development we first noticed in our inaugural Fortune 500 Europe listing final 12 months, the place the highest 10 is dominated by fossil gas giants, automotive and finance.
That doesn’t evaluate favorably with the U.S. listing, the place dynamic tech and pharmaceutical companies grapple for the highest spot alongside retail teams, and even hybrids of tech and retail, particularly Amazon.
There are simply 15 tech firms on this 12 months’s Fortune 500 Europe, in contrast with 49 within the U.S. American tech firms account for 5x extra income on the listing in contrast with these in Europe.
That explains a number of the massive income hole between the lists. The U.S. Fortune 500 firms gathered $18.8 trillion in revenues final 12 months, 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 shortly realizing the alternatives of automation.
“There’s a lot potential…”
Mark Learn OBE, CEO of WPP
Peter Oppenheimer, Goldman Sachs’ chief world fairness strategist and head of macro analysis in Europe, advised Fortune earlier this 12 months the most important winners of AI could possibly be the businesses that leverage the expertise somewhat 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 seek out efficiencies signify one of the best likelihood 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 primary digital revolution led by the web.”
To keep away from falling behind within the newest AI-based revolution, vertically integrating tech in Europe’s industries will probably be key, Draghi says, they usually must be fast.
“The query for European firms is how they’ll leverage AI extra aggressively, no matter its origin. There’s a lot potential for them to reap the benefits of the billions of {dollars} being invested globally,” Mark Learn OBE, CEO of communications firm WPP, advised Fortune.
Jason Alden/Bloomberg by way of Getty Pictures
Europe’s AI adopters
The debut of the inaugural Fortune 500 Europe listing in 2023 got here as companies had been beginning to come to phrases with the implications of the appearance of ChatGPT. Massive Language Fashions (LLMs) allowed each member of a family to make the most of the expertise, offering them with the primary actual understanding of its capabilities.
“The subject [of AI] in itself shouldn’t be new,” Florian Mueller, EMEA head of AI apply at consultancy Bain & Co, advised Fortune.
“I feel what has modified, and ChatGPT in all probability marks the actual second of change, is that the speed of adoption has dramatically elevated.”
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 or not it’s utilizing it for software program growth, for buyer help, whether or not it’s supporting information staff of their processes, a number of uptake within the advertising and marketing house. All of these you see actually throughout 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 in the beginning of the 12 months.
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 almost 120 years in the past, has additionally embraced the usage of 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 shortly leveraging AI in cutting-edge drug discovery.
The shift, Mueller says, has created a struggle 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 Pictures
Is it actual?
The proliferation of AI adoption was met with fanfare amongst traders, who cheered firms’ enthusiasm for tech that promised to spice up productiveness. This early within the recreation, although, there aren’t but many examples of this funding translating into vital returns on funding.
Europe’s banking sector could be the earliest instance of an business that may 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 had been going from legacy to attempting to turn out to be 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 12 months. However for different firms which were gradual to introduce autonomous methods and rent the sharpest new AI expertise, the window of alternative is closing.
“When it actually comes all the way down to ROI within the subsequent 18 months, they’re simply going to tug forward. And when that begins, the sport is over,” Mousavizadeh advised Fortune.
Startup DeepL offers translation providers for half of the U.S. Fortune 500. David Parry-Jones, DeepL’s chief income officer, says there’s a number of noise round LLMs which have made rollout more durable throughout organizations.
“The promise is clearly dramatic on the idea of what this stuff might do, however the actuality of implementation inside a big enterprise shouldn’t be the identical,” Parry-Jones advised Fortune.
Krisztian Bocsi/Bloomberg by way of Getty Pictures
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 might trigger Europe to overlook out on the most recent technological revolution.
Talking to the FT earlier this week, Nicolai Tangen, the CEO of the $2 trillion Norwegian oil fund, summarized: “In America, you could have plenty of AI and little regulation, and in Europe, you could have little AI and plenty of regulation.”
Creating, launching, or simply utilizing expertise is more durable in Europe than it’s wherever else on the earth.
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. Nonetheless, as Mario Draghi’s report final month discovered, the EU is falling behind its world counterparts with regards to innovation,” Brittin advised Fortune.
Brittin agreed {that a} explicit problem within the EU was the extent to which regulation on AI was applied 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 street, however these guidelines are sometimes conflicting, untested, and inconsistently applied.
“Put merely, growing, launching, or simply utilizing expertise is more durable in Europe than it’s wherever else on the earth. To remain within the world race, the EU wants a brand new method: mitigating the dangers of recent expertise whereas enabling innovation.”
