On June 3, 2026, the European Commission released the EU Tech Sovereignty Package. Taken together, its constituent measures represent an effort to reduce reliance on US and other non-EU technology and digital services and to ensure the development of a domestic, low-carbon lifecycle for cutting-edge digital technology. Currently, the EU is heavily reliant on non-EU digital products, services, infrastructure and intellectual property. Among other things, the package aims to further onshore semiconductor manufacturing in the EU, incentivize the development of a domestic European AI industry, provide incentives, including on the demand side, for chips and other technology, and reduce reliance on foreign countries for critical infrastructure and technologies. The package is composed of two legislative proposals (the Chips Act 2.0 and the Cloud and AI Development Act) and two initiatives (the EU Open Source Strategy and Strategic Roadmap for Digitalisation and AI in Energy).

Key Provisions

Chips Act 2.0

The original EU Chips Act of 2023 focused on expanding semiconductor manufacturing and research capacity in the EU. However, the EU still reportedly produces only 10% of global semiconductors and almost none of the world’s leading AI chips. Chips Act 2.0 represents a robust supplement to the 2023 Act and aims to address three key concerns: overdependence on third countries for semiconductor design and manufacturing, insufficient crisis preparedness capabilities and the lack of EU-based downstream industries to absorb chip production. Its central goal is to facilitate new strategic projects along the advanced technology value chain through increased private and public investment and a simplified, accelerated approval procedure. Among other things, the bill includes the following proposals:

• A shift of existing EU policy towards ensuring that chips made in the EU are produced at a greater scale and are also deployed within EU AI and cloud infrastructure.
• Creating alignment with other EU cloud and AI leadership initiatives, including support for AI-optimized servers, accelerators and cloud infrastructure built on EU-designed chips.
• Establishing new EU-level initiatives covering AI chips, cloud stacks and data center technologies, including targets for energy efficiency.
• Stimulating demand for and supply of domestic European chips. The bill would establish Demand Accelerators that align new production with industry needs. It would also boost funding for "strategic" projects that fill gaps across the semiconductor value chain.
• Providing support for research, innovation and skills development in the semiconductor industry.
• Accelerating permitting procedures with a target of maximum one-year approvals for new chip manufacturing facilities.

Cloud and AI Development Act (CADA)

CADA responds to the unprecedented demand for computing capacity driven by AI and digital services. As noted by the European Commission, data center capacity in the EU has not kept pace with growing demand, and the capacity that does exist is concentrated in a few European hubs. For example, Frankfurt, Paris, Amsterdam and Dublin account for 65% of the EU data center market. This has led to dependence on foreign cloud and AI providers throughout the EU. Linked to Chips Act 2.0 from the demand side, CADA attempts to stimulate demand for advanced chips and address this shortage by incentivizing the construction of data centers. The legislation aims to achieve this goal by streamlining and simplifying permitting, integrating data centers with electricity systems and creating designated data center acceleration zones, while at the same time laying down requirements for EU-origin content in public procurement for AI and cloud services. The bill’s three primary objectives are to support research and development, accelerate the deployment of data center capacity and support EU data center autonomy.

EU Open Source Strategy

This strategy moves beyond open source as a cost-saving tool and frames it as strategic infrastructure. It requires public sector bodies to consider open-source solutions and share reusable software, while also establishing EU-level tools to support reuse. As with other measures in the package, this strategy is driven by concern that the EU digital economy is overly dependent on a small group of foreign technology companies and producers. It aims to increase transparency, reduce dependence on specific vendors and companies and create an overarching framework for Europe’s digital infrastructure.

Strategic Roadmap for Digitalisation and AI in Energy

This measure is the EU's effort to modernize its energy system by embedding digital technologies, data sharing and AI into electricity networks, renewable energy systems, buildings and industrial energy use. The EU hopes that the rollout of European sovereign AI solutions will facilitate and improve the decarbonization process, which in turn supports data centers. The roadmap also explores locating data centers next to renewable energy generation plants and other measures to mitigate environmental risks posed by enormous data center energy consumption. The roadmap aims to avoid greenwashing by tying data center expansion to measurable efficiency metrics.

Next Steps

Chips Act 2.0 and CADA will now move into the ordinary legislative process. Both the Council (EU member states) and the European Parliament will negotiate amendments and eventually a final version through a process that will take months. The timing of final adoption will depend on the legislative process, but current planning assumptions suggest adoption in 2027.

Impact on Businesses

The EU Tech Sovereignty Package represents an acceleration in Europe’s decoupling from US technology and digital services. While the package could support a budding EU chip manufacturing and data industry, it could also disrupt current supply chains and impose burdensome new regulations on businesses. This creates both opportunities and risks across a wide range of companies and sectors in the transatlantic market, and stakeholders should carefully monitor and purposefully engage as the draft legislation is negotiated.