On June 3, the European Commission published its Tech Sovereignty Package, a set of legislative and policy initiatives designed to address what the Commission characterizes as Europe’s technological dependencies on non-European suppliers. The Package marks a further step in the evolution of the EU’s technology policy, with initiatives spanning the full tech stack—from chips and infrastructure to software, cloud, and artificial intelligence. Through this “ecosystem” approach, the Commission seeks to reduce supply-side dependencies by strengthening domestic capabilities in Europe and stimulating demand in downstream sectors.
The Package comprises four components: two legislative proposals—(i) the Cloud and AI Development Act (CADA), and (ii) the Chips Act 2.0—as well as two non-legislative initiatives—(iii) the EU Open Source Strategy and (iv) a Strategic Roadmap for Digitalisation and AI in Energy.
This blog post provides an initial, high-level overview of the four initiatives through which the Commission seeks to advance a “European way” to tech sovereignty, with potential implications for industrial ecosystems in Europe and beyond, including cloud, telecoms, automotive, aeronautics, and defense sectors.
Link to CADA: A Proposed Regulation to Build Capacity While Defining “Sovereign” Cloud Services CADA: A Proposed Regulation to Build Capacity While Defining “Sovereign” Cloud Services
At the core of the Package is the proposed Cloud and AI Development Act (CADA), which seeks to scale EU-based cloud and AI infrastructure. It is therefore likely to be of particular importance to cloud computing providers, data center operators, AI developers, public sector customers of these services, and companies relying on critical digital infrastructure in Europe.
The proposal aims to triple EU data center capacity over the next five to seven years and ensure that the Union has the capacity it needs by 2035. To that end, CADA creates a framework for the “Cloud and AI Leadership Initiatives”, intended to promote research, innovation, and large-scale capacity across the EU cloud and AI ecosystem. As set out in the proposal, these Initiatives cover a broad range of objectives, including (i) more energy- and resource-efficient data center technologies; (ii) greater autonomy across the cloud stack; (iii) the development of frontier, physical, and industrial AI; (iv) the use of AI in the public sector; and (v) broader adoption and skills development. Member States would also be required to adopt national cloud and AI strategies aligned with these objectives.
CADA also introduces a EU Cloud Sovereignty Framework, which establishes four “assurance levels” for cloud computing services. These levels are based on criteria such as control over the service, control over the supply chain, treatment of data, infrastructure location, and cybersecurity. Member States and Union entities would each be required to carry out individual sovereignty risk assessments to determine the appropriate level of assurance for different public-sector use cases. Accordingly, the proposal leaves room for national “à la carte” variation in the application of the EU Cloud Sovereignty Framework, instead of a harmonized approach. According to the draft, the Commission would have the power to adopt implementing acts requiring private companies in sectors regulated by the EU’s horizontal cybersecurity law—the revised Network and Information Systems Directive (NIS2)—to carry out similar assessments. It would also have the power to adopt implementing acts identifying third countries whose cloud providers may be subject to audit against the EU Cloud Sovereignty Framework.
CADA combines sovereignty-related requirements with industrial policy tools. It includes mechanisms for strategic projects, data center acceleration zones, and public procurement measures, while also promoting the development of open and secure European cloud and AI solutions.
Link to Chips Act 2.0: An Updated EU Semiconductor Ecosystem Strategy Chips Act 2.0: An Updated EU Semiconductor Ecosystem Strategy
The Chips Act 2.0 reflects a renewed Commission effort to foster advanced semiconductor manufacturing in Europe. The proposal pursues two objectives: (i) reducing EU dependence on third countries for semiconductor design and manufacturing; and (ii) improving crisis preparedness to better ensure the EU’s security of supply.
While the original Chips Act focused primarily on supply-side measures, the proposed Chips Act 2.0 places greater emphasis on demand-side tools. It aims to stimulate demand for high-performance AI chips by leveraging AI infrastructure initiatives, including AI Factories and Gigafactories, as well as the broader build-out of data centers and cloud infrastructure across the Union. To help generate that demand, the Commission proposes instruments such as public innovation procurement, “Demand Accelerators”, and a dedicated forum to promote the uptake of EU-designed and EU-made chips.
On the supply side, the proposal introduces the concept of “Strategic Projects” across the semiconductor value chain. These projects would be eligible for facilitated access to public investment, fast-track permitting, and support measures designed to accelerate deployment. The explanatory memorandum to the draft Regulation also points to a potential, first-ever EU semiconductor facility for advanced manufacturing, including AI chips and other advanced technologies, with pilot production envisaged in the 2030-2033 period.
Under the reinforced “Chips for Europe Initiative 2.0,” the proposal also places renewed emphasis on the industrialization of pilot lines for testing and experimentation and on strengthening the wider semiconductor ecosystem, including through support for photonics and photonic integrated circuits, competence centers, and a “Chips Fund” for start-ups, scale-ups, and SMEs.
In parallel, the Commission seeks to improve crisis preparedness through a “Business-to-Business Semiconductor Supply Chain Platform”, which would allow companies to share non-commercially sensitive information in aggregated form to support risk identification and resilience planning. The Commission also plans to develop an EU Blueprint for semiconductor crisis management by the second quarter of 2027.
Link to The EU Open Source Strategy as a Sovereignty Tool The EU Open Source Strategy as a Sovereignty Tool
The Package’s third pillar is the EU Open Source Strategy, which seeks to mitigate vendor lock-in risks, strengthen European digital autonomy, and promote interoperable digital infrastructure across both the private and public sectors. The Strategy treats open source not merely as a software-development model, but as a broader governance and industrial policy tool that, according to the Commission, can help Europe lower technology costs, accelerate innovation, and reduce dependence on foreign providers.
The Strategy is built around four main objectives: (i) leveraging open source for tech sovereignty through deployment and uptake; (ii) strengthening and promoting a “vibrant open source ecosystem”; (iii) promoting open and interoperable digital ecosystems for public administrations; and (iv) reinforcing digital standards and international outreach. It combines supply-side measures—intended to help communities and companies develop, scale, maintain, and secure open source solutions—with demand-side measures intended to increase public- and private-sector uptake.
The Open Source Strategy emphasizes the need to promote open digital public infrastructure and aligns this ambition with procurement and public-administration reform. The Strategy indicates that the CADA proposal introduces an “open source-first” principle for public purchases of cloud and AI software, while also promoting a “public money, public code” logic for software developed or procured by public administrations.
Link to Strategic Roadmap for Digitalisation and AI in Energy Strategic Roadmap for Digitalisation and AI in Energy
The fourth component of the Package connects the tech sovereignty agenda with the Union’s climate and energy objectives. The Strategic Roadmap for Digitalisation and AI in Energy is intended to support the deployment of EU digital and AI solutions in energy-relevant sectors and use cases, including electrification, grid optimization, system integration, demand-side flexibility, and energy efficiency in buildings and industry.
With respect to data centers, the Roadmap indicates that the Commission will adopt a Data Centre Energy Efficiency Package, which would include (i) a report on improving the energy efficiency of data centers; (ii) a Delegated Act establishing an EU rating scheme for the sustainability of data centers; and (iii) the launch of a public consultation on minimum performance standards for new and existing data centers in the EU. The rating scheme would cover, among other things, energy efficiency, water efficiency, clean energy use, waste heat reuse, and flexibility. According to the Roadmap, the rating scheme is to be adopted in 2026, with the first labels in 2027, while the needs assessment for minimum EU energy performance standards is due by 2027.
Link to Strategic Considerations Strategic Considerations
Taken together, the Package represents a notable effort by the Commission to move beyond an approach focused on requiring EU operators to maintain strong resilience against external threats, and to take a more proactive approach to building internal capacity for critical technologies.
Semiconductor companies, cloud providers, data center operators, AI developers, software vendors, open-source businesses, public-sector suppliers, and energy-tech stakeholders may need to assess how the proposed and accompanying initiatives could affect market access, funding opportunities, project permitting, procurement conditions, cybersecurity expectations, and sustainability requirements.
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Covington is closely monitoring the development of the EU Tech Sovereignty Package and related initiatives across semiconductors, cloud and AI, digital infrastructure, public procurement, cybersecurity, and sustainability regulation. We are well placed to advise on these policy developments and engagement with relevant decision-makers. We help gather intelligence, analyze legislative initiatives, navigate complex regulatory requirements, and design and execute strategy at the EU and across Member State capitals.