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Dado Ruvic | Reuters

LISBON, Portugal — Tech giants are increasingly investing in the development of so-called “sovereign” artificial intelligence models as they seek to boost competitiveness by focusing more on local infrastructure.

Data sovereignty refers to the idea that people’s data should be stored on infrastructure within the country or continent they reside in.

“Sovereign AI is a relatively new term that’s emerged in the last year or so,” Chris Gow, IT networking giant Cisco’s Brussels-based EU public policy lead, told CNBC.

Currently, many of the biggest large language models (LLMs), like OpenAI’s ChatGPT and Anthropic’s Claude, use data centers based in the U.S. to store data and process requests via the cloud.

This has led to concern from politicians and regulators in Europe, who see dependence on U.S. technology as harmful to the continent’s competitiveness — and, more worryingly, technological resilience.

Where did ‘AI sovereignty’ come from?

The notion of data and technological sovereignty is something that has previously been on Europe’s agenda. It came about, in part, as a result of businesses reacting to new regulations.

The European Union’s General Data Protection Regulation, for example, requires companies to handle user data in a secure, compliant way that respects their right to privacy. High-profile cases in the EU have also raised doubts over whether data on European citizens can be transferred across borders safely.

The European Court of Justice in 2020 invalidated an EU-U.S. data-sharing framework, on the grounds that the pact did not afford the same level of protection as guaranteed within the EU by the General Data Protection Regulation (GDPR). Last year the EU-U.S. Data Privacy Framework was formed to ensure that data can flow safely between the EU and U.S.

These political development have ultimately resulted in a push toward localization of cloud infrastructure, where data is stored and processed for many online services.

Filippo Sanesi, global head of marketing and operations at OVHCloud, said the French cloud firm is seeing lots of demand for its European-located infrastructure, as they “understand the value of having their data in Europe, which are subject to European legislation.”

“As this concept of data sovereignty becomes more mature and people understand what it means, we see more and more companies understanding the importance of having your data locally and under a specific jurisdiction and governance,” Sanesi told CNBC. “We have a lot of data,” he added. “This data is sovereign in specific countries, under specific regulations.”

“Now, with this data, you can actually make products and services for AI, and those services should then be sovereign, should be controlled, deployed and developed locally by local talent for the local population or businesses.”

The AI sovereignty push hasn’t been driven forward by regulators — at least, not yet, according to Cisco’s Gow. Rather, it’s come from private companies, which are opening more data centers — facilities containing vast amounts of computing equipment to enable cloud-based AI tools — in Europe, he said.

Sovereign AI is “more driven by the industry naming it that, than it is from the policymakers’ side,” Gow said. “You don’t see the ‘AI sovereignty’ terminology used on the regulator side yet.”

Countries are pushing the idea of AI sovereignty because they recognize AI is “the future” and a “massively strategic technology,” Gow said.

Governments are focusing on boosting their domestic tech companies and ecosystems, as well as the all-important backend infrastructure that enables AI services.

“The AI workload uses 20 times the bandwidth of a traditional workload,” Gow said. It’s also about enabling the workforce, according to Gow, as firms need skilled workers to be successful.

Most important of all, however, is the data. “What you’re seeing is quite a few attempts from that side to think about training LLMs on localized data, in language,” Gow said.

‘Reflecting values’

In Italy, the first LLM trained specifically on the Italian language data, called Italia 9B, launched this summer.

The aim of the Italia project is to store results in a given jurisdiction and rely on data from citizens within that region so that results produced by the AI systems there are more grounded in local languages, culture and history.

“Sovereign AI is about reflecting the values of an organization or, equally, the country that you’re in and the values and the language,” David Hogan, EMEA head of enterprise sales for chipmaking giant Nvidia, told CNBC.

“The core challenge is that most of the frontier models today have been trained primarily on Western data generally,” Hogan added.

In Denmark for example, where Nvidia has a major presence, officials are concerned about vital services such as health care and telecoms being delivered by AI systems that aren’t “reflective” of local Danish culture and values, according to Hogan.

On Wednesday, Denmark laid out a landmark white paper outlining how companies can use AI in compliance with the incoming EU AI Act — the world’s first major AI law. The document is meant to serve as a blueprint for other EU nations to follow and adopt.

“If you’re in a European country that’s not one of the major language countries that’s spoken internationally, probably less than 2% of the data is trained on your language — let alone your culture,” Hogan said.

How regulation fueled a mindset shift

That’s not to say regulations haven’t proven an important factor in getting tech giants to think more about building localized AI infrastructure within Europe.

OVHCloud’s Sanesi said regulations like the EU’s GDPR catalyzed a lot of the interest in onshoring the processing of data in a given region.

The concept of AI sovereignty is also getting buy-in from local European tech firms.

Earlier this week, Berlin-headquartered search engine Ecosia and its Paris-based peer Qwant announced a joint venture to develop a European search index from scratch, aiming to serve improved French and German language results.

Meanwhile, French telecom operator Orange has said it’s in discussions with a number of foundational AI model companies about building a smartphone-based “sovereign AI” model for its customers that more accurately reflects their own language and culture.

“It wouldn’t make sense to build our own LLMs. So there’s a lot of discussion right now about, how do we partner with existing providers to make it more local and safer?” Bruno Zerbib, Orange’s chief technology officer, told CNBC.

“There are a lot of use cases where [AI data] can be processed locally [on a phone] instead of processed on the cloud,” Zerbib added. Orange hasn’t yet selected a partner for these sovereign AI model ambitions.

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How TikTok’s rise sparked a short-form video race

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How TikTok’s rise sparked a short-form video race

TikTok’s grip on the short-form video market is tightening, and the world’s biggest tech platforms are racing to catch up.

Since launching globally in 2016, ByteDance-owned TikTok has amassed over 1.12 billion monthly active users worldwide, according to Backlinko. American users spend an average of 108 minutes per day on the app, according to Apptoptia.

TikTok’s success has reshaped the social media landscape, forcing competitors like Meta and Google to pivot their strategies around short-form video. But so far, experts say that none have matched TikTok’s algorithmic precision.

“It is the center of the internet for young people,” said Jasmine Enberg, vice president and principal analyst at Emarketer. “It’s where they go for entertainment, news, trends, even shopping. TikTok sets the tone for everyone else.”

Platforms like Meta‘s Instagram Reels and Google’s YouTube Shorts have expanded aggressively, launching new features, creator tools and even considering separate apps just to compete. Microsoft-owned LinkedIn, traditionally a professional networking site, is the latest to experiment with TikTok-style feeds. But with TikTok continuing to evolve, adding features like e-commerce integrations and longer videos, the question remains whether rivals can keep up.

“I’m scrolling every single day. I doom scroll all the time,” said TikTok content creator Alyssa McKay.

But there may a dark side to this growth.

As short-form content consumption soars, experts warn about shrinking attention spans and rising mental-health concerns, particularly among younger users. Researchers like Dr. Yann Poncin, associate professor at the Child Study Center at Yale University, point to disrupted sleep patterns and increased anxiety levels tied to endless scrolling habits.

“Infinite scrolling and short-form video are designed to capture your attention in short bursts,” Dr. Poncin said. “In the past, entertainment was about taking you on a journey through a show or story. Now, it’s about locking you in for just a few seconds, just enough to feed you the next thing the algorithm knows you’ll like.”

Despite sky-high engagement, monetizing short videos remains an uphill battle. Unlike long-form YouTube content, where ads can be inserted throughout, short clips offer limited space for advertisers. Creators, too, are feeling the squeeze.

“It’s never been easier to go viral,” said Enberg. “But it’s never been harder to turn that virality into a sustainable business.”

Last year, TikTok generated an estimated $23.6 billion in ad revenues, according to Oberlo, but even with this growth, many creators still make just a few dollars per million views. YouTube Shorts pays roughly four cents per 1,000 views, which is less than its long-form counterpart. Meanwhile, Instagram has leaned into brand partnerships and emerging tools like “Trial Reels,” which allow creators to experiment with content by initially sharing videos only with non-followers, giving them a low-risk way to test new formats or ideas before deciding whether to share with their full audience. But Meta told CNBC that monetizing Reels remains a work in progress.

While lawmakers scrutinize TikTok’s Chinese ownership and explore potential bans, competitors see a window of opportunity. Meta and YouTube are poised to capture up to 50% of reallocated ad dollars if TikTok faces restrictions in the U.S., according to eMarketer.

Watch the video to understand how TikTok’s rise sparked a short form video race.

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Elon Musk’s xAI Holdings in talks to raise $20 billion, Bloomberg News reports

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Elon Musk's xAI Holdings in talks to raise  billion, Bloomberg News reports

The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)

Nurphoto | Nurphoto | Getty Images

Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.

The funding would value the company at over $120 billion, according to the report.

Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.

The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.

Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.

Faber Report: Elon Musk held call with current xAI investors, sources say

The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.

“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”

Read the full Bloomberg story here.

— CNBC’s Samantha Subin contributed to this report.

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Alphabet jumps 3% as search, advertising units show resilient growth

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Alphabet jumps 3% as search, advertising units show resilient growth

Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.

David Paul Morris | Bloomberg | Getty Images

Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.

GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”

The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.

Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.

Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.

Read more CNBC tech news

Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.

During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.

Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.

Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.

Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.

“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.

WATCH: Gemini delivering well for Google, says Check Capital’s Chris Ballard

Gemini delivering well for Google, says Check Capital's Chris Ballard

CNBC’s Jennifer Elias contributed to this report.

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