Europe's push to strengthen its digital economy is being shaped by two powerful forces: rapidly evolving technologies – notably AI – and the region’s growing dependence on non-European cloud providers. As new technologies become more deeply embedded in business and public services, European leaders are under increasing pressure to rethink how cloud infrastructure is built, owned, and governed across the continent.

At the heart of this debate is the question of competitiveness and control. Policymakers, regulators, researchers, and industry leaders are exploring how Europe can strengthen its own cloud providers’ local propositions. The aim is to help them scale, compete globally, and drive innovation. Crucially, this must be achieved without losing control over where European data is stored, processed, or accessed.

The urgency is clear when looking at today’s market dynamics. Around 72 percent of cloud services are delivered by AWS, Microsoft Azure, and Google Cloud, and up to 90 percent of European data sits on infrastructure outside EU control. This level of market concentration exposes Europe to legal and geopolitical risk, making cloud sovereignty less a policy aspiration and more a practical challenge that demands clear, scalable solutions.

Data is the force driving sovereign cloud demands

The need for robust sovereign data infrastructures is more important than ever; there needs to be a careful balance between cloud innovation and data control. IDC predicts that data generation will double to 527,469EB of generation in 2029. In this context, it is clear why there is an increasing demand for sovereign cloud in Europe.

IDC has predicted that global spending on sovereign cloud solutions will reach nearly USD $258.5bn by 2027, driven by market demand as well as laws and regulations that include the General Data Protection Regulation (GDPR), Digital Operational Resilience Act (DORA), and the Data Act. These laws do not prohibit data transfers, but place such obligations around data protection, supply chain, security controls, and risk management that they tilt the balance towards a stronger emphasis on sovereignty and localization, especially in the current geopolitical environment.

One example comes from Germany-based cloud services provider (CSP), Arvato Systems, which deployed a sovereign infrastructure in Europe to support COVID-related public health workflows. This project highlights that sovereignty is both a vision for European leaders, and a viable solution in highly sensitive scenarios.

Building Europe’s digital backbone for AI

Domestic enterprises are increasingly prioritising data privacy, security, and control. European-based CSPs now have a unique opportunity to respond to this growing demand for sovereign cloud infrastructure. The rapid acceleration of AI enhances this opportunity.

As with cloud services generally, similar concerns are emerging around legal jurisdiction and transparency with respect to AI, particularly how AI models are trained and what data they use. There is growing recognition across Europe that AI systems must not only comply with the existing legal framework on data protection, cybersecurity, and AI but also reflect the core values of the continent, such as privacy, accountability, and human oversight. This has created an urgent need for sovereign AI solutions developed within European legal and ethical frameworks, ensuring that European data is not only protected, but also used responsibly and in the public interest.

One way European organizations are looking to capitalize on the capabilities of AI without sacrificing sovereignty requirements is with unified private cloud platforms. Large language models (LLMs) can be set up securely in a private cloud, and ready-made AI apps can be deployed to help them take advantage of AI while retaining full jurisdictional control of their enterprises’ data.

A spectrum of sovereignty

Cloud sovereignty has moved from a theoretical policy goal to being a foundational pillar of Europe’s long-term digital strategy. It now drives decisions across governments and the industry. Rather than converging on a single approach, Europe is likely to adopt a variety of cloud models, with the level of sovereignty shaped by factors such as sector-specific needs, regulatory obligations, and the sensitivity of data involved. CSPs and businesses that can develop, deploy, and scale these flexible models across both public and private environments will be best placed to capture emerging market opportunities.