U.S. model upgrades are pushing AI startups to move fast – it’s unclear if Europe can keep up
Founded in 2022, ElevenLabs is an AI voice generation startup based in London. It competes with the likes of Speechmatics and Hume AI.
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Artificial intelligence companies are the hottest ticket items in today’s startup ecosystem but the pace of change is dominated by developments at OpenAI and Anthropic. For startups building on top of their models, it’s sink or swim.
With the U.S. currently surging ahead in the large language model (LLM) race, which demands huge checks, Europe’s opportunity lies in building tools that make AI useful, which is known as the application layer.
“That’s also where we think most of the profit will be made in the future,” Robert Lacher, a founding partner of Visionaries Club, told CNBC’s “Squawk Box Europe” earlier this year.
Generative AI companies clinched $49.2 billion in venture capital (VC) investment in the first half of 2025, surpassing 2024’s $44.2 billion across the whole year, according to consultancy EY. The U.S. is responsible for the majority of that, accounting for 97% of deal value and 62% of volume; Europe represented just 2% of value, but 23% of volume.
Risk appetite among VC investors on the continent is typically lower than in the U.S., while market fragmentation has long caused challenges for startups looking to scale quickly. Hungover from the 2021 tech boom and amid an economic downturn, steady growth and sound business metrics have also come back into focus in Europe. AI is still drawing eyeballs but it pales in comparison to the U.S.
Now, frequent updates of AI models like OpenAI’s ChatGPT and Anthropic’s Claude are pushing companies built on top of them to iterate faster or risk falling behind.
Europe does have its own LLM company – Mistral, the French startup that has raised 1.7 billion euros ($2 billion) in capital so far, including from Dutch chipmaker ASML – that is positioned as an open-source competitor to OpenAI, but there’s still a lot of ground to cover.
“The speed of innovation, speed of product velocity, speed of distribution, actually ends up winning over everything else,” Bryan Kim, a partner at VC firm Andreessen Horowitz, told CNBC’s “Squawk Box Europe” on Thursday from Italian Tech Week.
Sweden’s Lovable, a “vibe-coding” platform that enables others to build apps and websites with AI, and AI agent startup Sana are examples of such companies putting AI to use. Meanwhile, London’s AI video generation startup Synthesia and synthetic audio company ElevenLabs, also have specific AI applications. The latter did, however, later build its own LLM.
But “what does it mean when the product and technology you’re actually relying on changes every month. How do you move any slower than that and expect to win the game?” Kim said.
“What I came around with is, actually, momentum is the moat at this current juncture of AI development. Maybe we’ll get to a point where the model layer stabilizes it a little bit, and then we could talk about other things, but, right now, momentum is the only moat that I see,” he added.
Building the next Spotify
Momentum – and the ability to constantly iterate – often comes down to bagging cash to scale.
“If you look at the Europeans, we are revolutionary, we are romantics, we are resourceful,” Jean La Rochebrochard, managing director at Kima Ventures, told “Squawk Box Europe” on Thursday. However, “it’s hard to compete with a country where the appetite for risk is way higher, where the amount of capital is way higher as well, and the talent,” he said, referring to the US and speaking about AI generally.
La Rochebrochard is still optimistic that Europe can be home to the next big winner. For him, founders who have built outside of Europe and return to start up another venture are ones to watch.
“We do all hope that Mistral will become one of these behemoths, one of these $100 billion companies in Europe, just like Revolut did in the UK. If Revolut, Mistral and Spotify are doing it, why not another 10, 20, 50 others?” the investor added.
Indeed, British AI cloud company Nscale just nabbed $433 million in new funding, hot on the heels of a $1.1 billion Series B – the largest in Europe – announced just days ago. However, like Mistral, Nscale is an AI infrastructure play rather than application layer – a timely development as AI sovereignty continues to grab political and investor attention.
For Lovable CEO Anton Osika, it’s much more simple. “The only thing we need to do in Europe is change our mindset that it is possible,” he told “Squawk Box Europe” on Tuesday.
“Traditionally it has been more of a constraint with access to the amount of technical talent, of access to capital, that is not the bottleneck anymore,” he argued.
Osika’s own company, for example, can act as a CEO’s technical cofounder if they need one. Meanwhile, Lovable is also luring top talent from the U.S. to Sweden to work at the startup, Osika said.
He added: “It’s much faster for us to hire in Europe than it is to do so for U.S. counterparts, where there’s 1,000 more companies like Lovable, so it is a competitive advantage to be building from Europe.”
Technology
Quantum stocks Rigetti Computing and D-Wave surged double-digits this week. Here’s what’s driving the big move
Inside Google’s quantum computing lab in Santa Barbara, California.
CNBC
Quantum computing stocks are wrapping up a big week of double-digit gains.
Shares of Rigetti Computing, D-Wave Quantum and Quantum Computing have surged more than 20%. Rigetti and D-Wave Quantum have more than doubled and tripled, respectively, since the start of the year. Arqit Quantum skyrocketed more than 32% this week.
The jump in shares followed a wave of positive news in the quantum space.
Rigetti said it had purchase orders totalling $5.7 million for two of its 9-qubit Novera quantum computing systems. The owner of drugmaker Novo Nordisk and the Danish government also invested 300 million euros in a quantum venture fund.
In a blog post earlier this week, Nvidia also highlighted accelerated computing, which it argues can make “quantum computing breakthroughs of today and tomorrow possible.”
Investors have piled into quantum computing technology this year, as tech giants Microsoft, Nvidia and Amazon have embraced the technology with a wave of new chip announcements, multi-million dollar investments and research plans.
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OpenAI’s new artificial intelligence video app Sora has already grabbed the top spot in Apple‘s App Store as its number one free app, despite being invite-only.
Sora, which was launched on Tuesday, allows users to create short-form AI videos and share them in a feed. The app is available to iPhone users but requires an invite code to access.
Here’s how to snag a Sora app invite code:
- First, download the app from the iOS App Store. Note that Sora requires iOS 18.0 or later to be downloaded.
- Login using your OpenAI account.
- Click “Notify me when access opens.”
A screen will then appear asking for an access code.
Currently, OpenAI has said that it is prioritizing paying ChatGPT Pro users for Sora access. The app is only available in the U.S. and Canada, but is expected to roll out to additional countries soon, the company said.
If you do not know someone who can provide an access code, several people are sharing invite codes on the official OpenAI Discord server, as well as on X and Reddit threads.
Once you input your access, you will be able to start generating AI videos using text or images. Users are also able to cameo as characters in their videos as well as “remix” other posts.
The app is powered by the new Sora 2.0 model, an updated version of the original Sora model from last year. The video generation model is “physically accurate, realistic, and more controllable” than prior systems, the company said in a blog post.
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OpenAI now has two of the top three free apps in Apple’s App Store, and its new video generation app Sora has snagged the coveted No. 1 spot.
The artificial intelligence startup launched Sora on Tuesday, and it allows users to generate short-form AI videos, remix videos created by other users and post them to a shared feed. Sora is only available on iOS devices and is invite-based, which means users need a code to access it.
Despite these restrictions, Sora has secured the top spot in the App Store, ahead of Google‘s Gemini and OpenAI’s generative chatbot ChatGPT.
“It’s been epic to see what the collective creativity of humanity is capable of so far,” Bill Peebles, head of Sora at OpenAI, wrote in a post on X on Friday. “Team is iterating fast and listening to feedback.”
Sora is powered by OpenAI’s latest video and audio generation model called Sora 2. OpenAI said the model is capable of creating scenes and sounds with “a high degree of realism,” according to a blog post. The startup’s first video and audio generation model, Sora, was announced in February 2024.
OpenAI said it has taken steps to address potential safety concerns around the Sora app, including giving users explicit control over how their likeness is used on the platform. But some of the initial videos posted to the app, including one that depicts OpenAI CEO Sam Altman shoplifting, have sparked debates about its utility, potential for harm and legality.
“It is easy to imagine the degenerate case of AI video generation that ends up with us all being sucked into an RL-optimized slop feed,” Altman wrote in a post on X on Tuesday. “The team has put great care and thought into trying to figure out how to make a delightful product that doesn’t fall into that trap, and has come up with a number of promising ideas.”
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