Deutsche Telekom and the Schwarz Group have unveiled plans to construct an AI gigafactory, according to German newspaper Handelsblatt. Discussions between the two companies are reportedly in the advanced stages, and they intend to apply for one of the EU-funded large data centers.

Handelsblatt reported on Sunday that the DAX-listed telecoms giant and unlisted retailer Schwarz are targeting the $23.4 billion (~€20 billion) earmarked by the EU for the construction of large data centers in Europe. However, a formal agreement has not yet been reached or signed. Meanwhile, the region hopes to catch up with China and the U.S. through these projects.

According to the report, collaborations for the construction of these large data centers in Europe are imminent. Schwarz CEO Gerd Chrzanowski and Telekom CEO Timotheus Höttges initiated the new collaboration, according to insider reports. Brookfield, a Canadian financial investor, could reportedly also support the project as a financier.

Telekom seeks to elevate Germany’s AI dominance 

A Telekom spokesperson stated that the company is interested in establishing Germany’s dominance in the AI race through the EU AI gigafactory projects. However, the spokesperson declined to comment on the joint bid with Schwarz. Brookfield and Schwarz apparently also declined to comment on the potential collaborations when contacted.

However, a top manager from the Schwarz Group had previously hinted at the cooperation between the two companies in public. Rolf Schumann, co-CEO of the digital subsidiary Schwarz Digits, also stated at the mid-November summit for European digital sovereignty that his company will join forces with Deutsche Telekom to bring one of the gigafactories to Germany. Höttges was reportedly standing a few meters from Schumann during this revelation.

Deutsche Telekom, SAP, Schwarz, and Ionos reportedly came together a few months ago to pursue EU funding for a large data center in Germany. The consortium aims to strengthen Europe’s position in the face of competition from the U.S. and China. 

Meanwhile, the EU plans to fund three to five large AI data centers across the European continent. The European Commission also intends to tap public funding through the European Investment Bank to attract private investors to the project. Each of the facilities requires an investment of nearly ~$3.39 billion to $5.66 billion (€3 to €5 billion) and is expected to house at least 100,000 AI chips capable of training agile AI models. 

Europe fires back in the global AI race

Christine Knackfuss-Nicoli, the CTO of Deutsche Telekom’s T-Systems division, recently emphasized the urgency of establishing independent AI infrastructure in Europe. She pointed out that this is the window of opportunity for Germany and Europe to establish an independent AI infrastructure. 

“Rarely before have the signs and the common will in Europe been as strong as they are today.” 

–Christine Knackfuss-Nicoli, CTO of Deutsche Telekom’s T-Systems division

Deutsche Telekom operates 16 data centers and announced last year plans to expand and establish up to five additional sites. The company has also implemented AI systems within its existing networks and data centers to improve energy efficiency.

Meanwhile, cloud solutions provider Ionos stated that it is in discussions with the German government and several companies regarding the EU’s AI gigafactories program. The company added that, in principle, it views the European Commission’s AI infrastructure initiative as an essential step towards Europe’s AI independence and is interested in participating. European infrastructure reportedly lacks the necessary computational capacity to train large-scale AI models, resulting in a dependency on facilities in other regions.

The EU’s initiative allegedly responds to Europe’s concerns about its competitiveness in AI development. Each of the proposed AI gigafactories will function as a high-capacity hub with significant automation and computational capabilities. The AI gigafactories also seek to strengthen the digital sovereignty of individual EU member states.

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