"Germany is at a crossroads in the global race for artificial intelligence (AI) – and the Chinese company Deepseek has just given us a reset button.
To finally seize this opportunity, decisive action and the implementation of a 100-day plan are needed to bring Germany and Europe to the forefront of the AI competition. We have missed the revolutions of the internet and cloud computing. Without swift action, we risk missing the next big opportunity in AI as well. But with the right strategy, we can position Germany as a global AI leader and transform our ailing economy.
US President Donald Trump began his second term with the announcement of "Stargate," a $500 billion investment in expanding AI infrastructure. During the World Economic Forum in Davos, which was taking place concurrently, the news was a source of shock.
But this news was overshadowed by an even bigger event just a few days later: The Chinese company Deepseek released "R-1," an open-source model reportedly as powerful as the ChatGPT variant o1 from the American industry leader Open AI.
Deepseek has thus changed the parameters of the AI race: The Chinese upstart has developed its competitive Open AI rival at a fraction of the cost. The hurdles for building AI are thus becoming ever lower.
The European effort to develop homegrown large-scale language models seems obsolete in light of this development.
The real race now concerns the broader adoption of AI. The decisive factor is who creates the most innovative applications and companies based on these technologies, as the real added value now lies at the application level. This time we have witnessed nothing less than a major reset in AI history.
The good news is: The Deepseek reset means we are in the second half of the AI game. Germany is ideally positioned to become a leader in AI – if we build on our strengths: our domain-specific expertise in key industries where we are already global leaders, such as mechanical engineering, the automotive industry, pharmaceuticals, healthcare, energy, and logistics. Therefore, we must now act quickly and pragmatically. We need an action plan for artificial intelligence, implementable within the first 100 days of the new federal government.
Area of Action 1: Make Germany attractive for founders
The race for large language models is over. What matters now is who builds the next generation of large companies based on these models. The true value lies at the application level, comparable to Amazon, Netflix, or Meta in the internet revolution. Germany must therefore finally create better conditions for founders to come or stay here. Our current system is too bureaucratic for founders. Digital company registration modeled on Delaware, also in English, flexible employee participation programs, and an agile labor market are crucial. Dismissal protection must become more flexible, and the power of works councils must not block the use of AI. The EU AI Act must be implemented in such a way that our companies remain competitive.
We also need a large-scale marketing campaign to demonstrate that Germany is open for business. We have a disastrous image among investors and founders, which needs to be corrected: According to the Gründerszene (startup scene), one in four German founders wants to build their second startup abroad. With the proposed measures, we will ensure that the best talent stays in Europe.
Area of Action 2: Promote Adaptation and Key Industries
Germany has neglected the introduction of AI in SMEs, the core of our economy. Government funding for artificial intelligence is currently widely dispersed – but what startups really need is revenue, not subsidies. We should encourage small and medium-sized enterprises to integrate AI solutions from startups.
An AI voucher program or tax breaks could help lower the barriers to entry.
The government itself should also become a customer of AI solutions – this generates direct revenue for startups and increases administrative efficiency. If we lack courage in Europe, courage must be incentivized.
Area of Action 3: Mobilize Capital
We need a comprehensive overhaul of our pension system. The intergenerational contract has been broken and should be replaced by a private pension provision instrument, such as the employer-funded 401(k) model similar to one that the US introduced. Pension funds should flow directly into future-oriented opportunities – venture capital, scale-ups, and the German stock market – tailored to individual risk tolerance.
A portion of this capital should flow into our startup ecosystem. This would not only offer the public higher returns but also create social acceptance. We could be proud and invested in our AI future. The government should make big bets with a few, but strategic, and large-scale partnerships, like the US did with Stargate. This race won't be won by 1,000 startups, but by ten that become large and category-defining. Germany needs bold public-private partnerships and major investments.
These three areas of action aren't rocket science. Other countries are leading the way. What's crucial is a rethink: be bold, act, and build on our strengths. Artificial intelligence offers the chance to revive Germany's lost competitiveness. If we act now, we can seize this golden opportunity. We can't afford anything else.
Rasmus Rothe is co-founder and general partner of Merantix Capital, a venture capital firm that founds and invests in AI companies. He also serves on the board of the German AI Association.
A startup from China has reshuffled the cards. Germany must act quickly.” [1]
1. Deepseek ist die Chance zum Neustart im KI-Rennen. Frankfurter Allgemeine Zeitung; Frankfurt. 05 Feb 2025: 18. Von Rasmus Rothe
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