Europe’s largest companies are mainly in “old” industries. This is a trend we first spotted in last year’s inaugural Fortune 500 Europe list, with the top 10 dominated by fossil fuel giants, autos and finance.
This number does not compare to the US list, where dynamic technology and pharmaceutical companies are vying for the top spot alongside retail groups and even tech-retail hybrid Amazon.
There are only 15 high-tech companies on this year’s Fortune 500 in Europe, compared to 49 in the United States. US tech companies have five times more listed revenue than their European counterparts.
This explains some of the large earnings disparity between the lists. America’s Fortune 500 companies had cumulative revenues of $18.8 trillion last year, compared to $14.5 trillion for Europe’s largest companies.
While the early winners of the AI boom – NVIDIA, Microsoft, and Google – are on the west side of the Atlantic, legacy businesses are quickly realizing the automation opportunity.
“There’s a good chance…”
Mark Reid OBE, WPP CEO
Peter Oppenheimer, Goldman Sachs’ chief global equity strategist and head of European macro research, said earlier this year that the biggest winners from AI will not be cutting-edge companies like Canal Boom, but companies that leverage the technology. Maybe, he told Fortune. 18th century.
As the gap widens between AI players in the U.S. and other markets, and as CEOs battle over regulation continues in Europe, companies on the continent that leverage AI to drive efficiency are increasingly looking to see how Europe is setting itself apart from the U.S. This is the biggest opportunity to reduce this.
But the race is on. Former ECB President Mario Draghi wrote in his 69-page EU Competitiveness Report that Europe’s productivity diverged from that of the United States because it failed to “take advantage of the first digital revolution, led by the Internet” in the 1990s.
To keep up with the latest AI-based revolution, vertical integration of technology in European industry is key and needs to be done quickly, Draghi says.
“The question for European companies is how they can leverage AI more proactively, regardless of its origins. “Yes,” Mark Read OBE, CEO of telecommunications company WPP, told Fortune.
Mark Reid OBE, WPP CEO.
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European AI Employers
The debut of the first Fortune 500 Europe list in 2023 comes as companies are beginning to embrace the impact of the emergence of ChatGPT. Large-scale language models (LLMs) have made technology available to all members of the household, allowing them to really understand its capabilities for the first time.
“The topic is [of AI] That in and of itself is not new,” Florian Müller, head of the EMEA AI practice at consulting firm Bain & Company, told Fortune.
“I think what has changed, and perhaps what ChatGPT represents a real moment of change, is that the rate of adoption has increased dramatically.”
Muller added that compared to previous technological revolutions, implementing AI into organizations can be achieved at a relatively affordable cost.
Early evidence would suggest that European sluggers don’t want to be left behind with the latest innovations.
Muller notes that traditionally, implementing AI has typically been the purview of industries that already handle large amounts of data, such as data communications, banking, and insurance.
He added that Gen AI has seen extensive technology integration over the past two years.
“We’re seeing a lot of use in the marketing space, whether it’s used for software development, whether it’s used for customer support, whether it’s used to support knowledge worker processes – literally everything you see across the board. ”
Volkswagen, the 2024 Fortune 500 European leader, announced the launch of an AI company in January, following the introduction of ChatGPT in its vehicles at the beginning of the year.
Several automakers are using LLM as an in-car assistant, and AI is building the foundation for a potential future of autonomous driving.
Shell, a primarily fossil fuel-based company founded some 120 years ago, is also embracing the use of AI across its operations. The company used reinforcement learning to help optimize drilling operations, partnered with C3 AI to develop predictive maintenance capabilities, and used machine learning to forecast inventory and demand.
The pharmaceutical industry, home to European Fortune 500 companies such as Roche Group, Novartis and Sanofi, is rapidly leveraging AI for cutting-edge drug discovery.
This shift is creating a war for talent as non-tech companies scramble to hire data scientists and machine learning engineers to help transform their operations, Moller said.
Alexandra Mousavizadeh, Co-founder and CEO of Evident Insights Ltd
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Is it true?
The surge in AI adoption has caused a stir among investors, cheering companies’ enthusiasm for the technology, which promises to improve productivity. However, in the early stages of the game, there are still not many examples of this investment leading to a significant return on investment.
Europe’s banking sector may be the earliest example of an industry using AI to improve profitability.
Evident, an intelligence platform, has created an index of global banks categorized by talent, innovation, leadership, and transparency, and ranked by their level of AI readiness. Inevitably, European companies will lag behind U.S. companies that laid the groundwork for the AI transition early on.
Alexandra Mousavizadeh, co-founder and CEO of Evident, said Evident chose the banking sector as an implementation example because it represents “large organizations that are moving from legacy to AI-first.” They say this is because they are using AI in the entire role. .
European banks such as HSBC and Spain’s Groupe BBVA were among the fastest-growing Fortune 500 companies last year. But the window of opportunity is closing for other companies that are slow to adopt autonomous systems or hire the best new AI talent.
“They only move forward when the ROI over the next 18 months really matters. Once that starts, the game is over,” Mousavizadeh told Fortune.
Startup DeepL provides translation services to half of the US Fortune 500 companies. David Parry-Jones, chief revenue officer at DeepL, says there’s a lot of noise around LLM, which makes it difficult to roll it out across an organization.
“While the promise is obviously dramatic given what these things can do, the reality of implementation within a large enterprise is not the same,” Parry-Jones told Fortune.
Matt Brittin, President of Google EMEA.
Cristian Bosi/Bloomberg via Getty Images
Regulatory hurdles
Several CEOs, including Spotify co-founder Daniel Ek, have warned that regulatory differences between Europe and the United States could leave Europe behind the latest innovations.
Nicolai Tangen, CEO of the $2 trillion Norwegian Oil Fund, summed it up in an interview with the FT earlier this week: “The US has a lot of AI but very little regulation, and Europe has very little AI and a lot of regulation.”
Developing, launching, or simply using technology is more difficult in Europe than elsewhere in the world.
Matt Brittin, President, Google EMEA
Matt Brittin, Google’s president of EMEA, says Europe is well-positioned in many ways when it comes to AI.
“The company has a well-educated workforce and a single market, which could help new innovations scale rapidly and benefit everyone.” But last month, Mario Draghi said: “As the report makes clear, the EU lags behind its global peers when it comes to innovation,” Brittin told Fortune.
Mr. Bulletin agreed that a particular challenge in the EU is the extent to which AI regulations are enforced in the region.
“In the past five years, we have seen more than 100 new laws impacting the digital economy and society. Of course, there must be clear rules of the road, but these rules are contradictory and untested. It is often implemented inconsistently.
“Simply put, it is harder to develop, launch or simply use technology in Europe than in other parts of the world. If the EU is to remain competitive globally, it will need to develop new technologies while enabling innovation. We need a new approach to reducing technology risk.”
