OpenAI plans to open offices in Paris and Brussels to ‘establish itself in Europe

Image by Tung Nguyen from Pixabay

California-based company OpenAI is considering AI expansion in Europe as part of a larger push by CEO Sam Altman iton international markets after raising $6.6 billion.

This AI expansion in Europe is a strategic move to tap into the growing demand for AI technologies across the continent. The company plans to open offices in Paris and Brussels to “establish itself in Europe,” Euronews reported, citing a statement from OpenAI on October 9.  

It will also expand to New York City, Seattle, and Singapore. Last year, OpenAI expanded with offices in London and Dublin.

“We’re excited to open an office in Paris later this year and become part of its thriving ecosystem,” Altman said in the statement. “We can closely partner with French businesses, institutions, and developers to help them realize the benefits of AI.” 

OpenAI joins other US companies that have taken steps for AI expansion in Europe. Advanced Micro Devices (NASDAQ: AMD) bought Finland’s Silo AI in an all-cash transaction in July. Blackstone (NYSE: BX) invested in September in an AI data center in the United Kingdom. 

AI Sector Growth Forecast

By expanding in Europe, US tech companies are accelerating their AI investments to meet forecast demand for those products and services.

AI products and services could reach between $780 billion and $990 billion by 2027, according to consulting firm Bain & Co. 

AI Sector Growth Projections 2023-2027, Source: Bain & Company

The market, including AI-related services and hardware, will grow 40% to 55% annually from $185 billion in 2023, according to the consulting firm’s 2024 Global Technology report, 

AI market growth will be largely fueled by generative AI (GenAI). 

A McKinsey Global Institute survey showed that 65% of respondents said that their organizations are regularly using gen AI. That was nearly double the percentage from the previous McKinsey survey less than a year before. 

European Companies Are Falling Behind US Counterparts

European Union (EU) regulations are proving a hurdle in technology adaptation. The EU took steps this year to curb US tech giants’ market dominance with regulations that may delay the roll-out of AI products.

In response, Apple (NASDAQ: APPL) and Meta Platforms (NASDAQ: META) had delayed rolling AI features in Europe. Apple cited “regulatory uncertainties” for its decision in June. 

Since 2022, more than 90% of large language model-related (LLMs) funding has taken place outside of Europe. Furthermore, a McKinsey survey from 2023 revealed that Europe lags behind NA in GenAI adoption by 30%.”

Private investments in AI in the U.S. totaled $67.2 billion in 2023, followed by China at $7.76 billion. It amounted to $3.78 billion in the UK, leaving Germany, Sweden, and France, all EU members, trailing behind with investments totaling less than $2 billion.

Generative AI’s Impact on European Economy, Source: Mckinsey 

OpenAI Outraises European Rival by Far

French startup Mistral AI, OpenAI’s European rival formed in early 2023, has attracted more than €1 billion in investment last year. 

Following Microsoft’s (NASDAQ: MSFT) expansion in Europe through a partnership with OpenAI’s European rival, Mistral is now valued at nearly $6.2 billion.

In contrast, OpenAI raised in October $6.6 billion in capital from investors, valuing it at $157 billion. 

OpenAI’s ChatGPT held a near monopoly among production-grade generative AI solutions until 2023. With the increase of open-source and proprietary models improved to offer diverse options, including segmented versions of OpenAI’s offerings, other companies have gained traction.

GenAI Will Fuel Power Needs

The rise of GenAI is expected to accelerate data center power demand, accounting for potentially more than 5% of Europe’s total electricity consumption by 2030.

Globally, data center demand will more than triple by 2030, requiring $2 trillion or more in new energy resources globally.

Global data center demand growth, 2023-2030, Source: X 

But without competitive electricity prices, European data centers will be less likely to host generative AI applications and services, contributing to its lag in the AI race. 

EU companies still face electricity prices that are 2-3 times higher than those in the US, the European Commission wrote in a September report. 

European Power Costs Are Uncompetitive

Meanwhile, the operating costs of European data centers are typically more than 50% higher than those in the United States, making competitiveness more difficult. 

Data center construction in the U.S. is already on the rise, with capacity under construction in North America rising more than 70% year-over-year to 3.87 GW in the first half of 2024 from less than 3.1 GW in all of 2023.

North American Data Center Power Capacity Under Construction, Source: X

The energy needed to run AI tasks is accelerating, with an annual growth rate between 26% and 36%.

With clean energy goals to reach climate-neutral by 2050, Europe will need to strengthen the competitiveness of its clean energy sector.

US Investing in Data Centers to Power GenAI

US private equity firm Blackstone confirmed a $13 billion AI investment in a data center in northeast England in late September.

As part of the agreement, Blackstone will also contribute $143.7 million to a local fund to boost skills training and improve transportation infrastructure in the area.

The project is expected to create 4,000 jobs.

“The UK is a top investment market for Blackstone because of its powerful combination of talent and innovation along with a highly transparent legal system,” Jon Gray, Blackstone’s president and chief operating officer, said.