Why the EU’s AI regulations are infuriating tech giants

Unlock the Editor’s Digest for free

Imagine delving into the Editor’s Digest, handpicked by Roula Khalaf, Editor of the FT, where she shares her weekly selection of favorite stories – a treasure trove of insights and perspectives waiting to be discovered.

1. The chief executive of SAP, Europe’s leading software giant, recently shared a compelling narrative cautioning EU policymakers against over-regulating artificial intelligence and further widening the gap with the US in this evolving sector.

• Christian Klein emphasized the detrimental effects of excessive regulation on Europe’s competitiveness and its ability to test AI models effectively. He stressed that over-regulation could put Europe at a significant disadvantage compared to the US, impacting innovation and growth in the transformative AI sector.

1. The enterprise software landscape is undergoing a seismic shift with tech titans like Salesforce and Oracle racing to integrate generative AI through services like chatbots and virtual agents capable of interpreting and responding to natural language queries.

• However, the EU’s new Artificial Intelligence Act, Digital Markets Act, and stringent data protection rules have prompted concerns among tech companies like Meta and Apple. These regulations restrict the training of large language models (LLMs) and have led to the withdrawal of some AI products from the region.

1. While the US grapples with regulating powerful AI models, California Governor Gavin Newsom recently vetoed a bill aimed at regulating AI models built in the state, following pressure from tech groups.

• Christian Klein highlighted the importance of regulating the impact on businesses and end-users while allowing innovation to flourish. Instead of regulating the technology itself, Klein advocated for regulating the outcomes and effects of AI applications.

1. SAP’s strategic investment of €2bn annually in AI underscores its commitment to developing cutting-edge technologies. Klein emphasized SAP’s unique approach to AI, focusing on the development of its “Joule” chatbot, designed to address a myriad of tasks and drive operational efficiencies within businesses.

• By attracting top engineering talent from US universities and investing in AI start-ups like Anthropic and Cohere, SAP aims to leverage AI to enhance its suite of cloud-based apps, catering to a diverse range of customer needs.

1. SAP’s shift towards AI represents a significant transformation for the company, evolving from a traditional licensing model to a subscription-based cloud service provider. Despite initial challenges, SAP’s transition to the cloud has been met with success, driving increased revenue and market value.

• Klein’s leadership has been pivotal in SAP’s resurgence, with the company’s share price nearly doubling under his tenure. Despite these accomplishments, internal surveys reveal a morale issue among German staff, highlighting the need for organizational restructuring and a renewed focus on employee satisfaction.

In conclusion, the dynamic landscape of AI regulation and technological advancements underscores the pressing need for a balanced approach that fosters innovation while safeguarding against potential risks. As SAP continues to lead the charge in the AI space, embracing change, and driving digital transformation, it sets a compelling example for businesses navigating the complex terrain of the modern tech landscape.