Amid rising international commerce tensions, European firms are reassessing their cloud supplier selections, weighing geopolitical dangers alongside technical capabilities.
Based on OVHCloud CEO Benjamin Revcolevschi, these considerations are beginning to shift from IT departments to boardrooms.
“Within the present geopolitical context, we’re seeing a shift within the considerations of personal firms and public organisations in Europe. Questions of strategic autonomy are actually on CEOs’ agendas,” Revcolevschi mentioned through the firm’s quarterly earnings name. “The selection of a cloud supplier is not only a technical matter, but additionally a strategic challenge.”
Knowledge centres are central to AI improvement and digital operations, but a lot of the infrastructure underpinning these actions is owned by US hyperscalers: Amazon Internet Companies, Microsoft Azure, and Google Cloud. In mild of escalating tariffs and considerations over digital sovereignty, European corporations are exploring options that provide extra management over information and provide chains.
OVHCloud, which runs 43 information centres worldwide, is among the many suppliers benefiting from this shift. Its home rival Iliad, by means of its information centre arm OpCore, just lately introduced a €3 billion funding in AI infrastructure, indicating a rising momentum for homegrown options.
Tariffs and tech: Rising pressures on US suppliers
The cloud dialog is unfolding alongside broader market unease over tariffs. With new levies on imports coming into the US, and potential retaliatory measures looming, the implications stretch nicely past {hardware} makers. Digital service firms like Google are additionally underneath scrutiny.
Alphabet shares have dipped 6.5% since the latest tariff bulletins, reflecting investor concern over doable headwinds. A few of that concern ties again to promoting—the corporate’s principal income driver. If trade-related slowdowns impression international markets, advert budgets could also be among the many first to shrink.
Promoting accounted for 76% of Google’s income in 2024. In the course of the 2008 monetary disaster, the corporate’s income development dropped from 56% to 7%, highlighting its publicity to macroeconomic shifts.
There’s additionally the matter of digital providers taxes. Some international locations have already carried out charges focusing on massive US-based platforms. These taxes, often between 2% and 5% of income, might climb if commerce friction escalates.
Worldwide markets stay a core a part of Google’s enterprise, with over half of its income in 2024 coming from outdoors the US That reliance on international operations might change into a vulnerability if coverage shifts make it more durable or costlier to function overseas.
Infrastructure and status
On the infrastructure facet, Google’s cloud unit might additionally really feel the stress. A lot of the tools used to construct and run information centres is sourced internationally. Tariffs on these parts might elevate prices, prompting firms to rethink the place they construct. Google’s $75 billion capital expenditure plan for 2025 might now be topic to changes relying on how commerce guidelines evolve.
There’s additionally the reputational facet. As cloud clients—significantly in Europe—look to diversify, the notion of US-based suppliers as politically entangled might drive them towards smaller, regionally centered choices like Hetzner or Scaleway.
Alibaba’s momentum slows amid escalating tariffs
China-based Alibaba has skilled its personal turbulence. After a powerful begin to the 12 months—pushed partly by AI developments and a collaboration with Apple—the corporate’s shares have slipped almost 30% from March highs. The set off: a brand new spherical of tariffs.
America has imposed a 145% tariff on sure Chinese language imports, prompting retaliatory measures from Beijing. Though Alibaba’s direct publicity to US income is smaller than that of opponents resembling PDD Holdings, the broader uncertainty is affecting investor confidence.
The corporate’s This fall earnings are anticipated quickly, and analysts are retaining a cautious commentary on how commerce tensions may impression each its cloud and e-commerce operations. Alibaba has been investing closely in AI infrastructure, committing $50 billion over the subsequent three years. The corporate’s AI fashions have additionally been chosen by Apple for iPhone options in China, a transfer that drew constructive market consideration earlier this 12 months.
Nonetheless, the cloud facet of the enterprise—significantly worldwide growth—could also be more durable to navigate if geopolitical dangers develop.
Outlook: A shift towards regional methods
What’s changing into clear is that cloud infrastructure is extra than simply technical capabilities or value effectivity. For a lot of firms, significantly in Europe, the geopolitical backdrop is changing into as essential as product specs or help choices.
The current strikes by OVHCloud and Iliad, in addition to the evolving goals at corporations resembling Alibaba and Google, level to a broader recalibration underway. It’s unclear if this may lead to a extra fragmented international cloud market or higher resilience by means of diversification.
(Photograph by Unsplash)
See additionally: Google Cloud Subsequent 25: AI, cloud, and WAN
Wish to be taught extra about cybersecurity and the cloud from trade leaders? Take a look at Cyber Safety & Cloud Expo going down in Amsterdam, California, and London.
Discover different upcoming enterprise know-how occasions and webinars powered by TechForge right here.
