This paper explores the European Union’s Artificial Intelligence Act (EU AI Act), which entered into force in August 2024. The Act is examined through the lens of economic com-petitiveness, focusing on its implications for AI companies operating within the EU. The EU AI Act presents a risk-based classification system for AI systems—ranging from minimal to unacceptable risk—and imposes strict obligations for companies regarding high-risk and general-purpose AI models. While the minimal risk is unregulated, the limited risk AI systems are subject to lighter obligations.

From a comparative perspective, the study contrasts the EU’s precautionary, ethics-driven approach with the more innovation-centric models of the United States and China. By exploring national industry cooperation and policy makers response, using the case study of Sweden’s AI innovation ecosystem, this paper analyses how European states can support innovation and counter the effects that the EU AI Act has on the agility, scalability, and global competitiveness of European AI startups and SMEs. It highlights growing concerns from European leaders who warn that the Act’s complexity, vague definitions, and rapid implementation timelines could lower EU’s competitiveness.