Germany launched a major artificial intelligence (AI) project this month to cut its reliance on US providers of high-performance computing and data processing — a move seen as helping Europe to control its own AI future.

The Industrial AI Cloud, backed by Deutsche Telekom, was built in record time, taking just six months to plan, build and launch, compared with the typical 12 to 24 months.

The telecom firm repurposed and modernized an existing facility in Munich's Tucherpark, with nearly 10,000 NVIDIA Blackwell GPUs — the high-end chips currently in global short supply. Telekom says the computing power is sufficient for all 450 million EU citizens using an AI assistant simultaneously.

However, the Industrial AI Cloud isn't aimed at individual consumers. Instead, it targets Germany's industrial heavyweights, including automakers, machinery manufacturers and robotics companies. It could also be a critical tool for research institutions, the public sector and firms developing AI applications.

"We are investing in AI, in Germany as a business location and in Europe," Tim Höttges, CEO of Deutsche Telekom, said of the launch. "Our AI factory in Munich is the basis for innovative business models, for industry, start-ups ... the government — and for sovereignty. We are proving here that Europe can do AI."

Industrial AI taps into Germany's core strengths

The new project aligns directly with Germany's broader Industrial AI ambitions, tailoring AI to the country's niche — manufacturing  — rather than consumer-facing, where the United States and China have the clear lead.

Antonio Krüger, CEO of the German Research Center for Artificial Intelligence (DFKI), agrees that Industrial AI gives Germany a chance to play catch-up, without the trillion-dollar investment gamble by the world's two largest economies.

"Industrial AI allows Germany to play to its strengths: designing smaller, specialized AI models that utilize more than a decade of data from Germany's small and medium enterprises, known as the Mittelstand," Krüger told DW.

Germany's Mittelstand, widely regarded as the backbone of the country’s economy, has amassed years of highly specialized production, logistics, and machine-level data that is now invaluable for training industrial AI systems.

Germany pitches 'trustworthy AI'

The German strategy is also being framed as "trustworthy AI," turning the EU's often-criticized AI Act from a perceived drag on innovation into a competitive advantage by giving manufacturers clear, enforceable rules for deploying safe, reliable systems.

Krüger added that if Germany can "build up an infrastructure that is trustworthy enough for companies to hand over their data, it will help us stay competitive." 

The focus on integrity underpins other major Industrial AI investments, including Siemens' expanded partnership with NVIDIA, announced at CES 2026, to develop an Industrial AI Operating System. The company is also embedding AI assistants across factory‑automation platforms.

Bosch, meanwhile, is spending $2.9 billion (€2.4 billion) to roll out AI‑based technologies aimed at improving manufacturing quality control.

Germany's Economy Ministry projects that widespread AI adoption in industry could add at least one percentage point to annual real GDP growth starting this year.

Leaders' caution may slow AI rollout

Despite the huge potential of Industrial AI, Germany faces a familiar obstacle in recapturing lost ground in the AI race — aversion to risk. A common complaint about German business executives is their slow and hesitant decision-making. In this instance, AI projects in Germany often get stuck in pilot mode.

"German firms often try to make their AI products perfect before rolling them out," Ishansh Gupta, BMW’s AI and digitalization lead, told DW. "China and the US roll out imperfect versions to help them improve, learning from user feedback."

The BMW executive thinks Industrial AI will truly mature when German business leaders fully back the technology and once models deliver causal insights, which industry watchers say could be up to five years away.

Today's AI systems largely work by detecting statistical correlations in vast datasets. They spot patterns and associations rather than understanding why things happen. This limits their usefulness in complex industrial settings.

In the future, Industrial AI could help German manufacturers resolve much larger business crises, like unexpected supply issues, volatile energy prices, or the need to speed up new product launches.

"Let's say you want to work out how a strike in Poland could affect your supply chain," Gupta said. "With causal AI models, leaders could test a change of suppliers, reallocation of capacity, or adjust workforce planning to calculate the expected impact."

Industrial AI could help delay China's advance

The Industrial AI strategy lands at a pivotal moment for Germany’s economy. The country isn't just trailing in the global AI race. Its manufacturing base is also rapidly losing ground to China.

China was for decades a bonanza for German producers, providing both a vast consumer market and the cheap, reliable parts and raw materials that powered their rise. But in 2025, German exports to China slipped to €81.8 billion ($97.2 billion), their lowest level in a decade, according to the German government's statistics agency, Destatis.

From a peak in 2022, German exports to China have declined by nearly a quarter, led by a sharp fall of 66% in auto deliveries, the EU's Eurostat data shows. German manufacturers are also facing intense rivalry from China in their other major export markets.

A report published this month by the Rhodium Group, the New York-based research house that specializes in China, warned that Berlin "needs to seize the controls, defining long-term industrial and technological priorities, in close coordination with industry, and putting the policies in place to deliver on them."

Merz backs ambition with funding

Chancellor Friedrich Merz last year launched the country's High-Tech Agenda, promising €18 billion in funding before 2029. It prioritizes AI as one of six strategic technologies, alongside quantum computing, microelectronics, biotech, fusion and climate-neutral mobility.

"Artificial intelligence requires industrial scale," Merz said in a speech at the World Economic Forum in Davos last month. "Germany has one of the world’s largest pools of industrial data. That is just one reason why we are investing in high-performance AI gigafactories, speeding up the expansion of data centers and creating the digital infrastructure for a competitive AI economy."

Germany's new Industrial AI Cloud is already running at more than a third of its capacity, according to Deutsche Telekom. The platform has welcomed the Munich-based Agile Robots, which fuses AI with robotics, and PhysicsX, a specialist in technical simulation that helps shorten product-development cycles.

But while Industrial AI has the potential to help turn around Germany's fortunes, DFKI's Krüger thinks it may not be enough to prevent manufacturing decline in the long term.

"Within the next five to 10 years, industrial production will still play a big role [in the economy], but it will not be the most important sector," he told DW. "Germany needs to slowly transform into a service economy, especially digital services."

Edited by: Srinivas Mazumdaru