Europe's Physical AI Emerges as a New Key Player in the Global Market In recent years, we have witnessed the rapid development of artificial intelligence (AI) and the resulting global changes. However, most innovations have stemmed from software AI designed around language models. People are now turning their attention to a new domain called 'physical AI,' which can interact with the physical world beyond traditional software AI. This field is expanding its presence across various industries such as robotics, autonomous systems, manufacturing, logistics, and healthcare. According to an analysis published by PitchBook on March 25, 2026, Europe is embracing new opportunities as the AI competition expands beyond mere software models to include 'physical AI,' encompassing robotics and autonomous systems. Europe's move to establish itself as a global leader in physical AI demonstrates the industry's potential. Physical AI refers to AI designed not merely to reside in software but to control external hardware, i.e., physical machines, and enable them to operate autonomously. Unlike language models such as ChatGPT or Claude, which process text and information, physical AI includes technologies that control robots, autonomous vehicles, and manufacturing equipment in real physical environments. Physical AI is an integrated system that perceives its surroundings through sensors, makes complex decisions, and performs physical actions in real-time. Traditionally, Europe has lagged behind powerhouses like the United States and China in the language-centric software AI market. With American companies such as OpenAI, Google, and Anthropic leading the development of large language models, European firms found themselves relatively behind. However, in physical AI, Europe's specialized manufacturing technology and strengths in robotics are gaining attention. Europe possesses world-class technological capabilities in precision manufacturing, automation systems, and industrial robotics, accumulated over a long industrial history, and this foundation is proving advantageous for physical AI development. In particular, venture investment within Europe is concentrating on physical AI research and development, accelerating innovative growth. According to PitchBook's 2025 European Venture Report, American investors' interest in European startups is increasing, with 21.7% of VC (Venture Capital) deals in Europe involving U.S. companies, nearing an all-time high. This demonstrates the significant global market interest, including from the U.S., in European physical AI startups, clearly illustrating the movement of capital towards opportunities. South Korea and Europe Collaboration: Intersection of Technology and Market Moosa of Paladin Capital commented on this, stating, "The physical world is far more complex (than language). It's unrealistic to expect a perfect, all-encompassing model like ChatGPT or Claude. There's room for many more winners, not just one or two, and Europe has a significant opportunity to compete." This perspective suggests that Europe can gain a competitive edge in physical AI within the current global AI competition landscape. As Moosa pointed out, the physical AI market has fundamentally different characteristics from software AI. Language models, based on massive data and computing power, allow a few giant corporations to monopolize the market. In contrast, physical AI has unique requirements and constraints for each industry and application, creating an environment where diverse players offering specialized solutions can coexist. For instance, medical surgical robots, warehouse automation systems, agricultural autonomous machinery, and construction site robots each require entirely different technological approaches. Many European startups, in particular, are showcasing technologies utilizing physical AI in various areas such as healthcare robots, automated logistics systems, and manufacturing process automation. Based on its strong technological capabilities and excellent talent pool, Europe has the potential to become a new key player in the global AI competition within the physical AI sector. Countries such as Germany, France, Switzerland, and the Netherlands, in particular, are combining decades of accumulated know-how in industrial automation and robotics with physical AI to develop innovative solutions. These developments in Europe offer significant implications for the entire global AI ecosystem. As AI technology's advancement extends beyond the software domain to integrate with the physical world, a new competitive landscape is emerging. Regions or companies that lagged in the language model competition now have the opportunity to secure competitiveness in the global market through the new avenue of physical AI. Asian countries, including South Korea, also need to pay attention to these changes. South Korea is already a global manufacturing powerhouse and a leader in robotics technology, possessing an
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