BERLIN, Jan 8 (Reuters) – Germany’s small and medium-sized enterprises, commonly referred to as the **Mittelstand**, are scaling back their investments in **artificial intelligence (AI)**, even as overall corporate spending on AI applications surges. A recent study from management consultancy **Horvath** revealed that these companies allocated just **0.35% of their revenues** to AI technologies in 2025, a decline from **0.41% in 2024**.
In stark contrast, the average AI expenditure among all companies rose to **0.5% of revenues** in 2025, up from **0.4%** the previous year, creating a gap that Horvath noted leaves the Mittelstand investing approximately **30% below** the overall market average. This divergence underscores a troubling trend for a sector vital to Germany’s economy.
“Geopolitical tensions have unsettled many mid-sized companies and shifted their focus toward cost optimization,” stated **Heiko Fink**, the study lead and a member of Horvath’s management board. He further pointed out that initial AI applications may not have provided the efficiency gains that these firms had anticipated, leading to hesitance in further investments.
Fink cautioned that without a significant acceleration in AI adoption, the current technology gap risks becoming an “existential strategic risk” for the Mittelstand. The report cites several challenges hampering the ability of these mid-sized firms to implement AI, including bureaucratic hurdles, slow progress on digitalization, and concerns about **data protection** and **digital sovereignty**.
The findings reflect a broader hesitancy among Germany’s smaller businesses, which have historically been slower to adopt new technologies compared to their larger counterparts. As these smaller firms navigate an increasingly complex global landscape, they are prioritizing immediate operational stability over long-term digital transformation.
With the backdrop of rising costs, escalating geopolitical tensions, and a rapidly evolving technological landscape, the Mittelstand’s cautious approach may hinder its competitiveness. Many of these companies are increasingly aware that failure to embrace AI could jeopardize their market positions in the coming years.
The implications of this trend extend beyond individual companies. The Mittelstand represents a significant portion of Germany’s economy, known for its innovation and resilience. As such, any slowdown in technological adoption could reverberate through the broader economic landscape, impacting growth and job creation.
Looking ahead, experts underscore the need for a concerted effort to address the barriers faced by mid-sized firms. Initiatives aimed at streamlining regulatory processes and fostering a more supportive environment for digital innovation could prove essential in reinvigorating AI investment in this vital sector.
As the global demand for AI solutions continues to grow, mid-sized companies in Germany may find themselves at a critical juncture. Whether they can pivot quickly enough to embrace AI’s potential will likely determine their relevance and success in an increasingly digital economy.
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