Amid rising global trade tensions, European companies are reassessing their cloud provider choices, weighing geopolitical risks alongside technical capabilities.

According to OVHCloud CEO Benjamin Revcolevschi, these concerns are starting to shift from IT departments to boardrooms.

“In the current geopolitical context, we are seeing a shift in the concerns of private companies and public organisations in Europe. Questions of strategic autonomy are now on CEOs’ agendas,” Revcolevschi said during the company’s quarterly earnings call. “The choice of a cloud provider is no longer just a technical matter, but also a strategic issue.”

Data centres are central to AI development and digital operations, yet much of the infrastructure underpinning these activities is owned by US hyperscalers: Amazon Web Services, Microsoft Azure, and Google Cloud. In light of escalating tariffs and concerns over digital sovereignty, European firms are exploring alternatives that offer more control over data and supply chains.

OVHCloud, which runs 43 data centres worldwide, is among the providers benefiting from this shift. Its domestic rival Iliad, through its data centre arm OpCore, recently announced a €3 billion investment in AI infrastructure, indicating a growing momentum for homegrown solutions.

Tariffs and tech: Growing pressures on US providers

The cloud conversation is unfolding alongside broader market unease over tariffs. With new levies on imports entering the US, and potential retaliatory measures looming, the implications stretch well beyond hardware makers. Digital service companies like Google are also under scrutiny.

Alphabet shares have dipped 6.5% since the most recent tariff announcements, reflecting investor concern over possible headwinds. Some of that concern ties back to advertising—the company’s main revenue driver. If trade-related slowdowns impact global markets, ad budgets may be among the first to shrink.

Advertising accounted for 76% of Google’s revenue in 2024. During the 2008 financial crisis, the company’s revenue growth dropped from 56% to 7%, highlighting its exposure to macroeconomic shifts.

There’s also the matter of digital services taxes. Some countries have already implemented fees targeting large US-based platforms. These taxes, usually between 2% and 5% of revenue, could climb if trade friction escalates.

International markets remain a core part of Google’s business, with over half of its revenue in 2024 coming from outside the US That reliance on global operations could become a vulnerability if policy shifts make it harder or more expensive to operate abroad.

Infrastructure and reputation

On the infrastructure side, Google’s cloud unit could also feel the pressure. Much of the equipment used to build and run data centres is sourced internationally. Tariffs on these components could raise costs, prompting companies to reconsider where they build. Google’s $75 billion capital expenditure plan for 2025 may now be subject to adjustments depending on how trade rules evolve.

There’s also the reputational aspect. As cloud customers—particularly in Europe—look to diversify, the perception of US-based providers as politically entangled could drive them toward smaller, regionally focused options like Hetzner or Scaleway.

Alibaba’s momentum slows amid escalating tariffs

China-based Alibaba has experienced its own turbulence. After a strong start to the year—driven in part by AI developments and a collaboration with Apple—the company’s shares have slipped nearly 30% from March highs. The trigger: a new round of tariffs.

The United States has imposed a 145% tariff on certain Chinese imports, prompting retaliatory measures from Beijing. Although Alibaba’s direct exposure to US revenue is smaller than that of competitors such as PDD Holdings, the broader uncertainty is affecting investor confidence.

The company’s Q4 earnings are expected soon, and analysts are keeping a careful observation on how trade tensions might impact both its cloud and e-commerce operations. Alibaba has been investing heavily in AI infrastructure, committing $50 billion over the next three years. The company’s AI models have also been selected by Apple for iPhone features in China, a move that drew positive market attention earlier this year.

Still, the cloud side of the business—particularly international expansion—may be harder to navigate if geopolitical risks grow.

Outlook: A shift toward regional strategies

What is becoming clear is that cloud infrastructure is more than just technical capabilities or cost efficiency. For many companies, particularly in Europe, the geopolitical backdrop is becoming as crucial as product specs or support offerings.

The recent moves by OVHCloud and Iliad, as well as the evolving objectives at firms such as Alibaba and Google, point to a broader recalibration underway. It is unclear if this will result in a more fragmented global cloud market or greater resilience through diversification.

(Photo by Unsplash)

See also: Google Cloud Next 25: AI, cloud, and WAN

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