Assessing the Impact of Digital Sovereignty Rules on US Hyperscalers’ Expansion Across Europe

Abstract

Governments around the world are developing digital sovereignty strategies to reduce their dependence on foreign technology providers and reassert control over their digital infrastructures. In the European Union, this has resulted in a number of regulations – including the Digital Markets Act, the Data Act, the AI Act, and related initiatives – that aim to reduce Europe’s reliance on US cloud hyperscalers while developing domestic alternatives. This article asks how digital sovereignty rules shape states’ bargaining with tech giants and what these rules tell us about these firms’ infrastructural power. Theoretically, it proposes an updated version of the Obsolescing Bargaining Model (OBM) for digital infrastructures, which analyses whether there are analogies between the expansion of US oil companies in the 1970s and today’s bargaining between EU governments and US hyperscalers. Empirically, it traces the expansion of four hyperscalers – Amazon Web Services, Microsoft Azure, Google Cloud, and Oracle Cloud – across Europe between 2018-2026, combining firm-level data on data centre investments with text-as-data analysis on earning calls and annual filings to capture how firms adapt and respond to increased regulatory pressure. Findings show that digital sovereignty rules have so far had limited impact on hyperscalers’ expansion. This is due to factors such as enduring power asymmetries between governments and US hyperscalers, a lack of coordination among governments themselves, and the intrinsic limits of regulatory instruments that discipline firm behaviour but do not govern market access. The article contributes to existing debates on the structural power of big tech companies, the geoeconomics of digital infrastructures, and the interaction of regulation and industrial policy to shape firm-government relations.