US tariffs threaten European startups indirectly through inflation and tighter capital markets. AI is accelerating fast — Nvidia hit $44B quarterly revenue and Anthropic's Opus 4 can code autonomously for hours. The EU's startup strategy has promise but its 2026-27 timelines are too slow.
- Tariffs keep interest rates high, squeezing VC funding and M&A across Europe — even for software startups
- AI demand is exploding: Nvidia's $44B quarter, Google processing 50x more tokens, Opus 4 coding for 7 hours straight
- The EU's 28th regime and stock option reforms are good ideas arriving too late
Every week Mads and I take a look at the news of the week that will affect European venture, startups and investing.
On the docket this week:
The EU-US trade relationship is the world’s largest at $1.5 trillion — nearly three times the US-China corridor. And yet there’s never been a proper deal between the two. Now tariffs have forced everyone back to the table.
Most European startups sell software, so tariffs don’t hit them directly. They hit indirectly. Even a 10% baseline tariff adds up to a percentage point to US inflation, keeping interest rates high, suppressing M&A and IPOs, and tightening the venture capital that funds the next generation of companies. The plumbing of startup funding runs through macro, whether founders like it or not.
The UK rushed to cut a deal and came out worse — accepting higher US tariffs on British goods in exchange for marginal reductions the other way. The EU is a far more sophisticated negotiator, but any deal takes time. The real prize isn’t tariff reduction anyway — it’s regulatory harmonisation. If a European hardware startup didn’t have to go through entirely separate certification regimes on each side of the Atlantic, that friction reduction would be worth far more than a few points off tariff rates.
AI isn’t waiting for anyone
While politicians negotiate, AI is on a different clock. Nvidia posted $44 billion in quarterly revenue — a $160 billion run-rate company growing like a startup. Google is processing 500 trillion tokens a month, up 50x on a year ago. Anthropic released Opus 4, the first model shown to outperform human code reviewers — in one test it worked autonomously for seven hours without losing context.
At the startup level, the disruption is extraordinary. Companies we looked at twelve months ago have had their value proposition eaten by a single big tech release. But if building software were truly trivial now, why did OpenAI pay $3 billion for Windsurf and Google $33 billion for Wiz? When building gets faster, the advantage shifts to go-to-market — owning customers and locking in market share before the next wave hits.
Europe’s response: right ideas, wrong speed
The EU’s startup strategy has real substance. The 28th regime — a single EU-wide legal entity for startups — could be transformative. Stock option reform is overdue, with some countries still taxing founders on grant rather than exercise. A digital business wallet and regulatory sandboxes round out a solid set of proposals.
The problem is timing. These target 2026-27. OpenAI’s last round was $40 billion. The EU’s proposed fund is €10 billion of other people’s money. China now has four frontier-level open-source AI models built despite export controls. The gap is widening in real time and the response, however thoughtful, is moving at a different speed to the world around it.
Grab a tea and tune in wherever you listen to your pods. Search “Dan Bowyer Upside”
Frequently Asked Questions
How do tariffs affect European software startups?
Indirectly — tariffs drive inflation, keep interest rates high, and shrink the pool of venture capital and exit opportunities.
What is the 28th regime?
A proposed EU-wide legal entity letting startups incorporate once and operate across all member states instead of navigating each country separately.
Why are stock markets up despite all the chaos?
Equity investors believe AI's potential outweighs the risks from tariffs and fiscal deficits. Bond markets disagree — it's a fundamental split.
What's new about Anthropic's Opus 4?
It can fix codebases autonomously for hours without losing context — the first model shown to outperform human code reviewers.
Why did OpenAI buy Jony Ive's team for $6.5B?
A bet that the next computing platform won't be a phone — pairing AI with new hardware to challenge Apple.