Following the data – identifying Europe’s AI capitals

Whether it’s tech start-ups looking for office space that inspire new recruits or the Silicon Valley behemoths continuing their expansion, it is clear that AI will have a seismic impact on real estate markets across Europe over the coming years. In this context, identifying Europe’s capitals for AI occupiers will be crucial for investors, occupiers, and developers, as will analysing the factors driving this success.

Jennifer Townsend is a partner at Knight Frank

To come up with the answers, Knight Frank calculated the number of AI companies with more than 25 employees in cities across Europe, assessed the employee base and reviewed venture capital funding by deal value and count over the past year.

Unsurprisingly, London leads on every major metric: the city is home to 866 AI companies with over 25 employees, represents a headcount of 111,000, and saw 947 AI-led venture capital transactions over the past year. With its concentration of leading AI labs, world-class universities, and deep capital markets, in many ways the city is a unique case - what’s more interesting are the cities just below London.

Paris ranks second in terms of the breadth of its company and funding base. It has 363 AI companies with over 25 employees and a workforce of 32,400 in total. Paris attracted £4.35bn across 155 deals over the past year, second only to London on both measures.

While Mistral AI represented 34% of the disclosed value, a meaningful concentration, Paris’s deal count, company base, and seed pipeline demonstrate that its position is broader than that of a single flagship company.

Beyond the key ingredients that London offers, France’s AI ecosystem benefits from significant state backing and an emerging infrastructure advantage. The government has made AI a strategic priority, using public investment, streamlined planning, and partnerships with private capital to strengthen research, computing capacity and domestic scale-ups.

Energy is a further differentiator. France’s large nuclear fleet provides abundant, dependable and comparatively low-carbon electricity at a time when access to power is becoming a binding constraint on data centres. 

Out of the rest of the top five, Munich and Stockholm are the most surprising inclusions. Stockholm’s strength reflects decades of digital investment, starting back in the 1990s when tax incentives helped put one million PCs into Swedish homes. This fostered a digitally literate population that has since produced a range of successful AI companies, including Lovable and Legora.

Munich’s advantage lies in combining engineering and manufacturing expertise with strong digital infrastructure, rather than trying to replicate Silicon Valley. Its academic institutions supply standout researchers, mathematicians and computer scientists, while major automotive, manufacturing, energy and insurance companies create sustained demand for applied AI.

This gives start-ups access to customers with substantial budgets and complex use cases, as well as a talent pool experienced in deploying AI in demanding industrial environments.

The other way of identifying Europe’s AI capitals is through finding the cities that are attracting the most AI investment on a per capita basis, so the locations that are punching above their weight.

Cambridge comes out on top but, interestingly, Zurich ranks second. Once known primarily as a banking centre, the city is increasingly described locally as ‘Silicon Limmat’. Its appeal rests on its high quality of life, central location, broadly neutral approach to AI governance and the presence of major global technology companies with AI hubs or engineering teams in the region.

London and Stockholm again rank highly, but Amsterdam is fifth in the per-capita index. Amsterdam’s strength lies in its ecosystem density and start-up renewal, as it boasts the University of Amsterdam, Amsterdam Science Park, fintech and digital businesses, established corporates, investors and accelerator networks, all in the same compact city.

While London and Paris being the headline winners in this exercise is unsurprising, what this exercise does show is that there are several ways to build a thriving AI ecosystem and it is absolutely possible for a city to punch above its weight. Where some cities have made AI a priority in its own right by building the skills base and incentivising direct investment, others have succeeded by leveraging existing strengths in other established sectors. What is clear is that there is no time to lose – investors are picking winners.

Jennifer Townsend is a partner at Knight Frank