The EU’s Tech Sovereignty Package and the future of European digital power

On 3 June 2026, the European Commission presented the European Technological Sovereignty Package, a set of measures to strengthen Europe’s capacity in semiconductors, AI, cloud computing and open source software. The package comprises two legislative proposals, the Chips Act 2.0 and the Cloud and AI Development Act (CADA), alongside the new EU Open Source Strategy and the Strategic Roadmap for Digitalisation and AI in Energy.

The Commission framed the initiative as a fundamental shift in the EU’s approach to technology, underpinned by the recognition that digital dependence is no longer a market inefficiency to be tolerated, but a strategic vulnerability to be corrected through legislation.

Commission President Ursula von der Leyen stated that Europe cannot afford to depend on others for the technologies that keep its hospitals running, its energy grids stable, and its services secure, calling on the EU to convert its research excellence, industrial base and single market into technological sovereignty.

The package is designed to broaden choice in core technologies for EU businesses, citizens and public administrations, and to position Europe to capture a larger share of a global semiconductor market projected to reach EUR 1.37 trillion by 2030, with AI-related components accounting for roughly 70% of that growth.

The timing reflects a specific convergence of pressures. The rapid spread of AI applications is driving a sharp increase in demand for data centre and cloud capacity that EU infrastructure cannot currently meet at scale. At the same time, longstanding dependence on non-EU suppliers for advanced semiconductor manufacturing, chip design and cloud services has become increasingly difficult to ignore as geopolitical tensions have demonstrated the economic risk of concentrated supply chains.

The 2022 US CHIPS and Science Act, generous subsidy regimes in Asia and tightening export controls on advanced semiconductor equipment have accelerated the global race for technological self-sufficiency, prompting Europe to adopt a more active industrial policy response. 

Chips Act 2.0

The Chips Act 2.0 revises and expands the 2023 European Chips Act, which has mobilised more than EUR 52 billion in public and private investment, created an estimated 46,000 direct and indirect jobs and strengthened Europe’s research and innovation capacity in semiconductors. Despite this progress, the EU remains dependent on third countries for advanced chip manufacturing and semiconductor design.

The revised regulation is designed to accelerate Europe’s position across the entire semiconductor value chain, from raw materials and design to manufacturing and packaging, and to ensure that Europe captures a greater share of the growth in AI-related chip demand.

The proposal is structured around four objectives. On investment and competitiveness, the Act would cap permitting approvals at 12 months, introduce ‘Grand Challenges’ to support the development of strategically important chip types such as AI processors, and formalise Strategic Partnerships on Semiconductors with international allies.

To stimulate demand, it establishes Demand Accelerators to align new products with industry needs, expands innovation procurement, notably for European start-ups and scale-ups, and creates structural synergies with CADA to benefit from the data centre and AI Gigafactory buildout planned under that regulation.

On the supply side, the Act enables state aid for ‘First-of-a-Kind’ facilities not yet present in the Union, covering the full semiconductor value chain, designates strategic projects to unlock EU and member state co-investment, and creates a ‘Semiconductor Regions of Excellence’ label to attract investment at the regional level. To strengthen resilience, it establishes a business-to-business semiconductor supply chain platform and provides sector-specific guidance on risk assessment and mitigation.

The explicit linkage between Chips Act 2.0 and CADA reflects a deliberate industrial logic: European-made chips powering European cloud infrastructure, with demand from that infrastructure in turn supporting European chipmakers.

Cloud and AI Development Act

The Cloud and AI Development Act (CADA) forms a central part of the Commission’s AI Continent Action Plan and simultaneously addresses two structural problems: insufficient EU cloud and data centre capacity to meet AI-driven demand, and strategic dependence on a small number of non-EU cloud providers.

The Act is designed to facilitate and accelerate the deployment of sustainable cloud and data centre infrastructure, while ensuring the EU accelerates the rollout of cloud and AI in critical sectors and retains meaningful control over the infrastructure on which that rollout depends.

The Act focuses on three main areas. On research, development and innovation, it supports next-generation cloud and AI technologies, including frontier AI, industrial AI, and physical AI, introduces grand challenges to drive R&D efforts, and promotes adoption in strategic sectors through national cloud and AI strategies and new Experience and Acceleration Centres for AI in member states.

On capacity, it targets at least a tripling of EU data centre capacity within five to seven years, simplifies and accelerates permitting, and improves access to energy, land, water and financing. On sovereignty and autonomy, it establishes a single EU-wide sovereignty classification framework, promotes open source solutions as a tool for resilience, and introduces a common EU-level procurement framework for public administrations.

The sovereignty classification system merits particular attention. It introduces four assurance levels for cloud and AI services, to be applied by public sector bodies based on their own risk assessments. Level 1 requires data to be processed and stored within the EU. Level 2 requires providers to demonstrate independence from third countries and transparency over their software supply chain.

Level 3 requires providers to be owned and controlled from within the EU and to meet additional criteria including personnel citizenship, although the Commission retains the ability to recognise third-country providers at this level. Level 4 requires full transparency and control over the software supply chain with no third-country interference.

Cloud service providers seeking recognition under this framework must undergo an independent audit conducted by member state authorities. The framework is significant because it creates, for the first time, a legally grounded and progressive definition of what it means for a cloud service to be sovereign, moving the concept from political rhetoric to a procurement-relevant standard.

EU Open Source Strategy

The EU Open Source Strategy is the non-legislative pillar of the package most directly aimed at reducing dependence on proprietary, non-EU software. It places open source at the centre of the EU’s technological sovereignty approach, arguing that open ecosystems reduce supplier lock-in, increase transparency and give European developers and public administrations greater control over their digital infrastructure.

The strategy addresses a persistent structural weakness: the economic value generated by open source projects has historically been captured outside Europe, limiting the ability of European developers and companies to benefit fully from their own contributions.

The strategy is organised around four objectives. The first, Open Source for Tech Sovereignty, focuses on scaling the Open Internet Stack, a Commission-curated catalogue of EU-aligned open source solutions, and promoting alternatives to dominant proprietary products in areas such as cloud platforms, workplace tools, secure e-mail and decentralised social media.

The work will be carried out in cooperation with member states through the European Digital Infrastructure Consortium for Digital Commons. The second objective, Vibrant Open Source Ecosystem, targets start-up support through accelerators and procurement access, alongside a stewardship toolkit for critical open source assets and investment in digital skills across schools, universities, and civil services.

The third objective, Open Source in Public Administration, sets out procurement guidelines that favour open standards, reinforces the Commission’s Open Source Programme Office (OSPO) and the EU Public Sector OSPO Network, and seeks to embed openness and sovereignty-by-design in digital investment decisions across EU institutions and member states.

The fourth objective, Reinforced Standards and International Outreach, promotes EU open source developers and solutions internationally through the EU Tech Business Offer, supports uptake in partner countries and integrates open source communities into standardisation processes, including through a forthcoming revision of the EU Standardisation Regulation.

The strategy also intersects directly with the other package components. On semiconductors, it targets open hardware development through the Chips Joint Undertaking’s RISC-V programme. On AI, it supports the GenAI4EU initiative and promotes open source tooling for public sector AI adoption through the Apply AI Strategy.

On digital identity, it prioritises open source implementation of the European Digital Identity Wallet (EUDI Wallet) and the European Business Wallet. The strategy also interacts with the recently enacted Cyber Resilience Act (CRA), which imposes new security obligations on open source projects that have generated concern in the developer community. The Open Source Maintenance Instrument and critical dependency mapping exercises set out in the strategy are designed in part to address those obligations, though reconciling the CRA’s security requirements with the growth objectives of the strategy will be a key implementation challenge.

Strategic Roadmap for Digitalisation and AI in Energy

The Strategic Roadmap for Digitalisation and AI in Energy is the least legally binding element of the package but arguably the one that determines whether its ambitions are physically realisable. The targets set by CADA, particularly the goal of at least tripling EU data centre capacity within five to seven years, cannot be achieved without a corresponding expansion in reliable, affordable power supply.

Data centres are energy-intensive by nature, and the AI workloads they are increasingly required to process are even more demanding. The roadmap addresses this constraint by setting out how AI and digital technologies can improve the efficiency and flexibility of Europe’s energy systems while also enabling the energy infrastructure that these systems need.

The roadmap connects the package’s digital ambitions to the EU’s energy transition objectives, creating a mutually reinforcing relationship: cleaner, smarter energy systems create more viable conditions for data centre expansion, while AI-enabled demand management and grid optimisation tools reduce the cost and environmental impact of that expansion. The roadmap is also relevant as a governance document, since the deployment of AI in critical energy infrastructure raises its own questions about cybersecurity, data sovereignty and the concentration of control over systems on which entire economies depend.

Governance and policy implications

The Tech Sovereignty Package raises several governance issues that extend beyond its immediate legislative content. The most significant concerns the model it establishes for EU industrial policy. The package marks a clear departure from the long-standing assumption in EU competition policy that market mechanisms and trade openness are the primary tools for achieving efficient and innovative technology markets.

The explicit use of state aid for strategic semiconductor projects, the joint procurement frameworks in CADA and the deliberate promotion of EU-origin suppliers both in public procurement and sovereign cloud classification illustrate a greater role for public intervention in the technology sector. Whether the EU’s trading partners, particularly the United States and major Asian semiconductor producers, will treat these provisions as proportionate industrial policy or as market-distorting intervention is likely to become a significant diplomatic issue.

The package also has important implications for the governance of AI in Europe. It operates in parallel to the EU AI Act and the work of the EU AI Office, but addresses a different layer of the AI ecosystem. While the AI Act focuses on the risk profile and compliance obligations of AI systems once deployed, the Tech Sovereignty Package governs the infrastructure and supply chains that enable AI development in the first place.

The relationship between the two frameworks matters as decisions taken at the infrastructure layer, such as the cloud sovereignty level applied to a given public sector AI deployment, can have downstream consequences for compliance with AI Act requirements. The relationship between these frameworks will be an important area to monitor as implementation progresses.

A further coordination challenge arises internally. The package spans multiple policy domains and directorates-general within the Commission, including DG CONNECT for semiconductors, cloud and open source, and DG ENERGY for the energy roadmap.

It also interacts with DG COMP on State aid approvals and with DG TRADE on the trade implications of sovereignty-oriented procurement rules. Ensuring coherence across these areas during the legislative process, and subsequently during implementation, will require stronger-than-usual inter-institutional coordination.

Legislative process and upcoming milestones

The two legislative proposals, the Chips Act 2.0 and CADA, need to enter the ordinary legislative procedure, meaning they will be negotiated separately by the European Parliament and the Council of the European Union before trilogue negotiations between the two institutions and the Commission can begin.

Given the political and economic stakes involved, and the number of member states with competing interests in semiconductor investment locations and cloud market access, the negotiations are likely to be protracted. The original European Chips Act took approximately two years from proposal to final adoption, and CADA, which touches on the politically sensitive question of digital sovereignty vis-à-vis key trading partners, may encounter comparable friction.

Several near-term milestones are already in view. The Commission is expected to launch a call for AI Gigafactories in July 2026, following the European High Performance Computing Joint Undertaking (EuroHPC JU) Governing Board’s agreement in principle on 1 June 2026. AI Gigafactories are large-scale, purpose-built AI training facilities and represent one of the most concrete and immediately actionable elements of the broader AI infrastructure agenda.

Their deployment is intended to provide European researchers, start-ups and industry with access to the kind of computing capacity currently concentrated in the United States, and the July call will be an early test of the Commission’s ability to move from legislative ambition to operational delivery.

The Commission will also launch a consultation with member states, the European Investment Bank Group and other key stakeholders to design a European equity capacity at scale for financing tech sovereignty ambitions. This implies that the Commission does not believe grant funding and state aid alone will be sufficient to mobilise the investment required, and that a blended finance model, combining public equity with private capital, will be needed.

The EIB Group’s involvement points towards the kind of risk-sharing instruments it has used in other strategic sectors, although the specific structures and governance arrangements have yet to be designed through the consultation process.

Broader context

The package does not emerge in isolation. It sits within a cluster of interconnected EU strategic frameworks that have, over the past two to three years, progressively shifted the EU’s economic policy stance from market liberalisation towards what the Commission calls ‘open strategic autonomy’: the maintenance of trade openness where possible, combined with targeted interventionism to reduce strategic dependencies where necessary.

The Competitiveness Compass, adopted earlier in 2025 and drawing heavily on the 2024 Draghi report on European competitiveness, identifies reducing strategic dependencies as one of three pillars for restoring European economic dynamism. The Tech Sovereignty Package is the most operationally specific expression of that pillar to date.

The Economic Security Strategy, adopted in 2023, provided the risk-assessment framework within which the package sits, identifying advanced semiconductors, AI, quantum computing and biotechnology as the technological areas posing the most significant dual-use and strategic dependency risks for the EU. The Tech Sovereignty Package translates that risk assessment into concrete legislative and policy instruments, with semiconductors and AI infrastructure receiving the most direct regulatory attention.

The Commission’s AI Continent Action Plan, which positions Europe to become a global AI leader by focusing on computing infrastructure, data, skills, and adoption, provides the most direct policy antecedent for CADA in particular. The Tech Sovereignty Package fast-tracks the infrastructure ambitions of the Action Plan and adds the supply chain governance dimension that the Action Plan did not fully address.

Taken together, these documents represent a sustained and internally consistent shift in EU digital and industrial policy, one in which technological leadership is treated not merely as an economic aspiration but as a precondition for political and regulatory autonomy in an increasingly contested global technological order.

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