Will France Be the AI Hub of Continental Europe?

French President Emmanuel Macron is marching ahead with his plan to make France the artificial intelligence (AI) powerhouse of continental Europe. Last year, Macron announced €500 million in new funding to boost the country’s AI development. This, combined with France’s hesitancy to further regulate certain foundation models during the European Union’s AI Act negotiations, is part of the country’s strategy to become an AI leader. France’s long-term aspirations are attainable, but not without reforms to its labor code, nurturing engineering talent, and a significant increase in capital investments – to name a few core areas that require attention. Furthermore, even if France becomes the AI hub of continental Europe, it remains unclear whether or not it will achieve the status of a global AI center.

Shadow of the Labor Code

France was the most ardent critic of the EU Artificial Intelligence Act in the later stages of the process, but EU-level regulations are not the only laws preventing the country from achieving its ambitions. France is well known for its strong worker protections, making it difficult for employers to fire underperforming workers or conduct layoffs for financial reasons. US tech firms doing business in France have also experienced this. In 2023, Google struggled to lay off employees because of strict worker protections. The company negotiated with works councils (now called Social and Economics Committees) to ensure voluntary departures. Mass layoffs during troubling economic headwinds is a common component of other successful technology sectors like in the United States. This system of mass layoffs is less than ideal for a whole industry of technology professionals. In practice, this does not mean that France should discard the full range of worker protections that are in its legal framework, rather it should continue to incorporate practical industry feedback wherever possible.

Since coming into office, Macron has partially reformed the labor code to make it easier for small to medium sized enterprises (SMEs) to navigate the law. However, these reforms have not gone without heavy criticism. Ultimately the government will have to continue to balance private sector flexibility with its national values.

Battle Over Talent

France, similar to its EU counterparts, is seeking to increase its AI talent. The quest for talent has taken hold among the world’s leading AI competitors, most notably between the US and China. Yet unlike France, the US and China train more engineers domestically, increasing the chances of producing breakout stars. Additionally, foreign talent is still more likely to flock to the US where the global players are headquartered. This is only further exacerbated by the lower wages for computer scientists in France compared to other competitors.

These facts are not an insurmountable barrier. The French lifestyle of a more disciplined work-life balance, access to the EU single market, and a generous safety net makes it an appealing place for experts in the technology sector, while remaining imperfect. The presence of Google, Microsoft, and other American tech giants also makes it easier for French-origin firms to entice certain talent to leave their current jobs and join their organizations. The French National Strategy for AI identifies human capital as an important component of achieving its goals. The government is taking steps to grow the nation’s engineering talent. Retraining engineers with a diverse range of backgrounds can only be a component of this effort. The greatest push will need to come from the external recruitment of already experienced foreign engineers and building talent through universities.

Battle Over Capital

Raising enough capital to sustain startups is a constant battle, especially during periods when the economy is wavering or when a firm’s products aren’t living up to the hype. The up and coming French firm Mistral AI has raised more than €385 million. This is still only a drop in the bucket for the amount needed to raise the fortunes of multiple AI firms and not just one over the next decade. In recent years, France has attracted more venture capital investment in the tech sector from abroad, but only slightly more than Germany. To maintain the lead, the government will have to continue to invest in both the companies producing new AI systems and the compute infrastructure needed to cover the cost of training innovative models. A recent report by the French AI Commission recommended investing €5 billion per year for five years in various ways in order to develop and deploy the technology.

Bigger Than Europe

It remains to be seen if France can achieve its AI goals. In many ways, the challenge of doing so is not unique to France. It can also be applied more broadly to other nations seeking to build up AI bona fides. It is uncertain whether France’s achievement as the AI hub of continental Europe would make it one of the prominent global AI centers, not simply a major regional player. The US, China, and UK are all better positioned to be the big three global centers for AI, dominating the talent pool and capital. Other nations with a strong tech sector – such as South Korea and Japan – will undoubtedly make attempts, along with India, a nation that is investing heavily in developing digital services for the global marketplace. If France is to compete effectively with these nations and not only its EU neighbors, it will need to think beyond the parameters of what the European Economic Area can offer, and how to market its products to the entire world.

The implications of France’s efforts run deep. Failure could mean that Europe falls further behind the US and China, unable to fully capitalize on the next wave of AI evolution. In the same vein, France’s success could make it a heartier marketplace not only for its domestic economic benefit, but also its military strength as AI tools are further integrated into defense systems. Either way, France is currently the nation best positioned to succeed in continental Europe. We will have to wait and see whether or not it can deliver.