Europe unveils tech sovereignty package amid growing concerns over reliance on U.S. tech: 'We want to be sure nobody has a kill switch'

The European Commission on Wednesday proposed a slew of rules intended to bolster homegrown chips, AI and cloud services as the bloc scrambles to develop tech sovereignty amid huge reliance on products and services from the U.S. and China.

The proposals, which must be approved by all 27 member states, include new actions to bolster advanced chip manufacturing and homegrown cloud computing.

As geopolitical tensions across the globe have ramped up, there have been growing calls for Europe to diversify away from non-European providers of critical tech, including U.S. tech companies, which currently dominate the European market.

"We cannot afford to depend on others for the technologies that keep our hospitals running, our energy grids stable and our services secure," Commission President Ursula von der Leyen said in a statement.

As part of the proposals, a Cloud and AI Development Act (CADA) is being introduced to "mitigate the risks stemming from the EU's reliance on third countries for cloud computing services" by implementing an EU-wide framework setting out different levels of sovereignty needed for cloud computing for sensitive workloads at public organizations, according to the Commission press release.

The European Commission is looking to ensure that cloud providers of critical workloads don't have a "kill switch," Executive Vice-President Henna Virkkunen told reporters.

She added it would be difficult for U.S. companies to reach the highest levels of sovereignty because of the U.S. Cloud Act, which allows U.S. law enforcement to request user data from American companies, regardless of where the data is stored.

"We want to make sure that our most critical sensitive data is stored in Europe," she said.

CNBC previously reported that the European Union was considering rules that would restrict its member governments' use of U.S. cloud providers to handle sensitive data.

The CADA is a "significant shift," Catherine di Lorenzo, partner at A&O Shearman, told CNBC.

"The direction of travel already goes well beyond data residency and includes ownership structures, immunity from extraterritorial laws, operational control, and supply-chain transparency," she said.

A second act designed to bolster Europe's semiconductor sector was also announced, dubbed Chips Act 2.0. The first act introduced a range of measures seeking to secure semiconductor supplies and increase the EU's global share of the market.

The new act aims to address overdependence on third countries for chip design and manufacturing and insufficient preparedness for crises, a proposal for the regulation said.

The Chips Act 2.0 will look to build capacity in cutting-edge semiconductor technologies that power AI. The Commission said it would "prioritize" building a foundry for advanced semiconductor manufacturing capabilities within the bloc.

"This package is an important step — in the age of AI, access to computing power, energy, talent and digital infrastructure will determine which countries prosper," the Tony Blair Institute for Global Change (TBI) Director of Science & Technology, Keegan McBride, told CNBC.

"But a full retreat into a Europe-first tech approach will leave the continent weaker," he added. "Great powers don't just use technology at home — they must also have the global ambition to build, deploy, and export their technology to the world. Right now, Europe isn't doing this."