A flight of artificial intelligence (AI) firms from Norway is being accelerated by fear of the government’s decision to adopt controversial European AI laws, shaking its already weak high-tech sector.
While pressure mounts on the European Commission (EC) to halt stringent rules governing “high-risk” AI systems, Norway is proceeding with plans to implement the AI laws in a hurry.
The government declared its purpose to keep Norway’s statute compatible with EU law, a principal of the EEA agreement by which companies from Norway, Iceland and Lichtenstein have access to the European single market.
But a flight of AI startups from Norway, prompted by high taxes on entrepreneurs and the burden of EU regulation, and Norway’s tendency to add tougher rules than even the EU devises when it implements European law, has raised fears that the law will impel more AI firms to leave.
Norway’s AI industry was shaken by news that Gelato, celebrated as a rare Norge tech startup “unicorn” worth $1bn, said it was moving to Sweden to escape punishing tax laws. Last month, robotics firm 1X, its second most successful AI startup, blamed a move to Silicon Valley on tax laws that undermined its attempt to hire the best foreign engineers. This was just months before Cognite, Norway’s largest AI firm, announced its US relocation, impelled by a desire for faster growth away from Europe’s sluggish, regulated market.
Meanwhile, Celebrated AI construction firm Consigli said in the summer that it had moved to the UK to be somewhere more open to innovation and driven by fast-moving business instead of the inert, cronyistic business networks found in the Nordics.
This all gave cause for concern about Norway’s proposed AI regulation, said Ingvild Strand von Krogh, head of technology policy at Norwegian technology business association Abelia: “We’ve heard from several companies – especially early-stage companies – that they’re looking towards the UK, where they aren’t burdened by the AI Act and where there is lighter regulation and better access to capital.
“It’s a concern for us that startups are locating elsewhere than Norway. It’s one thing we’ve been hearing – companies drowning in tech regulation from the EU. But many are focused on being ethical, so they can sell into the EU,” she said.
Fear of a regulatory clampdown had infected AI startups that were already being driven out of the country by its tax system, said Christopher Hof, senior adviser to TEK Norge, which represents national and foreign computing firms. TEK Norge was worried it might suppress innovation.
Hof, who wrote TEK Norge’s extensive submission to the consultation, said: “We fear over-regulation will lead to uncertainty. We are cautiously optimistic – we need regulation, but this might go too far.
“It’s like the GDPR implementation, where the fear of failure was bigger than the will to implement. Innovation and digitisation of our society were held back by fear of doing wrong and getting huge fines. We’ve seen an exodus, almost, of business owners leaving the country before the exit tax comes in.”
Norway has used its oil wealth to create a huge public sector and social safety net that precluded an entrepreneurial culture like neighbouring Sweden’s because if your business fails, said Hof, “you can always go back and find a job in the municipal government”.
Immature reality of industry
Both of Norway’s big tech associations nevertheless support the EU AI law. Abelia wants Norwegian law as similar to the EU as possible, so its firms are not obstructed from selling into the EU market. TEK Norge supports the AI Act in principle, said Hof, if Norway’s regulators did more to help companies be compliant than to fine them – which was a common warning in submissions to the consultation last month.
Yet Norway’s AI industry is already immature compared with its neighbours and other wealthy states. It ranks in no common lists of prominent AI firms, startups and investments. Venture capital investment in Nordic AI firms is the lowest among Europe’s largest economies, according to OECD data. It is a fraction of other advanced economies, and remains so even when measured per capita and compared with its Nordic neighbours, angel investor byFounders reported in January.
Mostly comprised of startups, and with large firms rare, Norway’s AI industry is focused on building tools to help other firms build and deploy AI systems, according to a landmark survey by the Norwegian School of Economics (NHH) in May.
“I don’t think the AI regulation will make much difference in Norway,” said Bram Timmermans, head of the NHH innovation school, and co-report author. “It doesn’t have a traditional high-tech sector. It doesn’t have many high-tech firms with core, fundamental technologies. That’s not something Norway has ever done. It adopts quickly in areas where it already has strengths.
Most of Norway’s AI firms develop applied systems in key national sectors, such as oil, fish, minerals, energy, logistics and manufacturing, he said. Almost all the world’s top 15 firms doing AI fish monitoring are Norwegian, he said. Cognite came from oil and gas.
The government announced a research centre for maritime AI last month to retain its global leadership in advanced seafaring technology, topping 1.3b kr (£100m) pledged for seven programmes in applied industrial systems, robotics, education, the arts and “ethics”. Those plans emerged on the eve of US leader OpenAI’s announcement that its first gargantuan Stargate data infrastructure investment would be in Norway.
With rising tension with Russia on its border and in its Arctic protectorate, and with its defence spending rising, OpenAI’s datacentre will support Norway’s NATO defence role, one newspaper reported. It will power industrial applications in Norway, with surplus capacity offered abroad, the firm said, and is 10 times the size of a Stargate deal OpenAI announced with the UK last month.
That was just weeks before Norwegian oil conglomerate Aker became lead investor in UK data infrastructure firm Nscale, in Europe’s “largest ever” second VC funding round in European history. Nscale is building Stargate Norway; Aker and OpenAI will own it.
There has meanwhile been broad support for the AI regulation in Norway. Some 70% of Norwegians want strict AI rules, Danish engineering firm Ramboll said in a survey celebrated by the consumer regulator. The national election had reinstated Norway’s Labour government that three weeks before was dominated by debates over tax policies, with the opposition, right-wing Progress Party, vehemently against them.
But the Progress manifesto supported tough AI rules too. AI should be held firmly to principles of human rights and privacy, said Erlend Wiborg, its representative on the Parliament’s Public Administration Committee, in a written statement. He stated that AI could weaken democracy and threaten free speech by distributing highly persuasive and manipulative disinformation on a large scale, adding that Norway should have AI laws compatible with its allies.
Regulate now, innovate later
Norway’s AI companies were reluctant to speak about it. But a prominent figure with close ties to Norway’s AI industry said its companies were deterred by its “monumentally stupid” wealth and exit taxes while they were still startups. The exit tax demanded nearly 40% on paper wealth of anyone who left the country, “making it impossible to attract foreign talent” that AI firms around the world are competing over.
When a Norwegian AI company gets its second round of investment funding, such as those that valued Norway’s celebrated startups as unicorns or near-so, it made founders liable to pay tax on their paper shares. Familial ties kept most AI startups in Norway, said the prominent figure. But many selling the “high-risk” systems such over which controversy is raging over burdensome EU rules are looking to the UK and US. They can adopt the requirements so they can sell into Europe later, if their product becomes successful, and they have enough money to shoulder the cost of compliance.
With EEA’s adoption of rules being slow, Norway could have given its own companies this leeway, said the prominent figure. Norwegian AI firms would be exempt from the rules unless they wanted to sell into the EU, but Norway plans to amend the EEA agreement to apply controversial parts of the AI Act as soon as they commence in August 2026.
“It could have delayed implementation of that particular mess for up to two years, giving Norwegian AI companies a chance to develop viable products on the same scale as the UK companies during the interim. But the government evidently did not want that. No one asked whether this is actually a good idea,” the prominent figure said.
Both UK and EU firms were being repressed by “regulate now, innovate later” governments, tech SME industry association the App Association said last week, upon publishing a survey that claimed regulation was costing them dearly in money, time and deterred custom. Direct calls for relief have emerged from Norway’s industrial establishment as well.
Europe’s technology and software sectors lagged the US because it needed deregulating, Paula Doyle, chief digital officer of AkerBP, said in support of Cognite in January.
