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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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Nvidia shares slump 3% in premarket as quarterly revenue growth slows

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Nvidia shares slump 3% in premarket as quarterly revenue growth slows

POLAND – 2024/11/13: In this photo illustration, the NVIDIA company logo is seen displayed on a smartphone screen. (Photo Illustration by Piotr Swat/SOPA Images/LightRocket via Getty Images)

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Nvidia shares dropped in U.S. premarket trading Thursday after the tech giant’s third-quarter earnings failed to impress investors.

Shares of the chipmaker slumped 3.21% at around 5:03 a.m. ET, following the Wednesday release of Nvidia’s quarterly results, which beat on both the top and bottom lines.

Revenue came in at $35.08 billion, up 94% year-on-year and exceeding the $33.16 billion forecast by LSEG analysts. Earnings per share was 81 cents adjusted, also above analyst expectations.

Other chipmakers fell on the back of the market reaction to Nvidia’s third-quarter results. Shares of Intel, Qualcomm and Micron Technology all lost 1% or more in value, while AMD declined 0.6%.

The slump in Nvidia also had a knock-on effect on European semiconductor firms. ASML, a key chip equipment supplier, dropped 0.9%, while compatriot Dutch chip firm ASMI fell 0.5%. Chipmakers BE Semiconductor, STMicroelectronics and Infineon slipped 0.8%, 0.7 and 0.6%, respectively.  

Several notable chip names were also in negative territory in Asia. TSMC, which makes Nvidia’s high-performance graphics processing units, eased as much as 1.5%. Contract electronics manufacturer Foxconn dropped 1.9%.

Why are Nvidia shares falling?

Nvidia has largely cornered the market for the high-powered chips powering the world’s most advanced artificial intelligence models, such as OpenAI’s ChatGPT.

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British regulators will soon announce competition remedies for the multibillion-pound cloud industry

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British regulators will soon announce competition remedies for the multibillion-pound cloud industry

Ofcom said it received evidence showing Microsoft makes it less attractive for customers to run its Office productivity apps on cloud infrastructure other than Microsoft Azure.

Igor Golovniov | Sopa Images | Lightrocket via Getty Images

LONDON — Britain’s competition regulator is preparing remedies aimed at solving competition issues in the multibillion-pound cloud computing industry.

The Competition and Markets Authority is set to unveil its provisional decision detailing “behavioral” remedies addressing anti-competitive practices in the sector following a months-long investigation into the market, two sources familiar with the matter told CNBC.

The sources, who preferred to remain anonymous given the investigation’s sensitive nature, said that the cloud market remedies could be announced within the next two weeks. The regulator previously set itself a deadline of November to December 2024 to publish its provisional decision.

A CMA spokesperson declined to comment on the timing of its provisional decision when asked by CNBC.

Plural co-founder on whether Nvidia's dominance can be shaken

Cloud infrastructure services is a market that’s dominated by U.S. technology giants Amazon and Microsoft. Amazon is the largest player in the market, offering cloud services via its Amazon Web Services (AWS) arm. Microsoft is the second-largest provider, selling cloud products under its Microsoft Azure unit.

The CMA probe traces its history back to 2022, when U.K. telecoms regulator Ofcom kicked off a market study examining the dominance of cloud giants Amazon, Microsoft and Google. Ofcom subsequently referred its cloud review to the CMA to address competition issues in the market.

Why is the CMA concerned?

Among the key issues the CMA is expected to address with recommended behavioral remedies, are so-called “egress” fees charging companies for transferring data from one cloud to another, licensing fees viewed as unfair, volume discounts, and interoperability issues that make it harder to switch vendor.

According to one of the sources, there’s a chance Google may be excluded from the scope of the competition remedies given it is smaller in size compared to market leaders AWS and Microsoft Azure.

Amazon and Microsoft declined to comment on this story when contacted by CNBC. Google did not immediately return a request for comment.

What could the remedies look like?

The CMA has said previously in June that it was more minded toward considering behavioral remedies to resolve its concerns as opposed to “structural” remedies, such as ordering divestments or operational separations.

The watchdog said in a working paper in June that it was “at an early stage” of considering potential remedies.

Solutions floated at the time included imposing price controls restricting the level of egress fees, lowering technical barriers to switching cloud providers, and banning agreements encouraging firms to commit more spend in return for discounts.

One contentious measure the regulator said it was considering was requiring Microsoft to apply the same pricing for its productivity software products regardless of which cloud they’re hosted on — a move that would have a significant impact on Microsoft’s pricing structures.

CMA Chief Executive Sarah Cardell is set to hold a speech on Thursday at Chatham House, a U.K. policy institute. In an interview with the Financial Times, she defended the regulator’s track record on competition enforcement amid criticisms from Prime Minister Keir Starmer that the agency was holding back growth.

She is expected to outline plans for a review in 2025 into whether the CMA should more frequently use behavioral remedies when approving deals, the FT reported.

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Bitcoin climbs, reaching a new all-time high above $97,000

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Bitcoin climbs, reaching a new all-time high above ,000

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Bitcoin breached the $95,000 level for the first time Wednesday evening as investors continued pricing in a second Donald Trump presidency.

The price of the flagship cryptocurrency was last higher by more than 3% at $97,646.68, according to Coin Metrics. Earlier, it rose as high as $97,788.00.

Shares of MicroStrategy, a bitcoin proxy, gained 3% in extended trading. Mining stocks rose as well, with Mara Holdings up 4%.

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Bitcoin continues its march toward $100,000

Bitcoin has been regularly hitting fresh records this month on hopes that Trump will usher in a golden age of crypto, which would include more supportive regulation for the industry and a potential national strategic bitcoin reserve or stockpile.

It is widely expected to reach $100,000 this year and double by the end of 2025.

“Bitcoin’s price continues to be driven by a number of factors including improved liquidity conditions, increased institutional adoption, and a regulatory environment that has flipped from a headwind to a tailwind,” said Sam Callahan, an analyst at Swan Bitcoin.

Another Trump term also implies larger budget deficits, potentially more inflation and changes to the international role of the dollar – all things that would have a positive impact on the price of bitcoin.

Bitcoin has gained more than 127% in 2024.

Don’t miss these cryptocurrency insights from CNBC PRO:

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