International Investors and the Location Germany

12.03.2026

11 minutes reading time

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AWS is investing €16.6 billion in German cloud infrastructure. Microsoft is committing €3.2 billion for AI capacity. Google plans €5.5 billion for data centres. Nvidia and Deutsche Telekom are building an Industrial AI Cloud worth €1 billion. And TSMC is constructing Europe’s first FinFET factory in Dresden. Yet Germany has lost 17 % of its foreign direct investment (FDI) projects, according to EY, slipping behind France and the UK. This is not a contradiction. It is the reality of a location that attracts billions in strategic technologies while structurally losing ground on average.

Key takeaways

FDI projects: 1,724 foreign investment projects in 2024 with a volume of €23.2 billion (GTAI), yet –17 % in the EY ranking – third place behind France and the UK
Tech billions: AWS (€16.6 billion), Microsoft (€3.2 billion), Google (€5.5 billion), Nvidia/Deutsche Telekom (€1 billion) and Apple (€2 billion) are pouring massive sums into German infrastructure
Semiconductors: TSMC/ESMC Dresden with more than €10 billion and €5 billion in public subsidies under construction; Intel Magdeburg (€30 billion) scrapped
Location weaknesses: 87 % of economists cite bureaucracy as a weakness, around 120 days for an operating licence (often under 40 in Southern Europe), FDI in chemicals down sharply since 2018
Special fund: €500 billion infrastructure fund as a signal, yet IW Köln criticises: 86 % replaces existing spending rather than financing new projects

The Paradox: Billions Flow In While Rankings Slide

According to Germany Trade and Invest (GTAI), 2024 saw a total of 1,724 foreign investment projects in Germany-new establishments, expansions, and relocations, excluding M&A. The investment volume reached €23.2 billion, the third-highest figure ever recorded. The U.S. led with 229 projects (18 %), followed by Switzerland and the U.K. (10 % each), the Netherlands, and China (7 % each).

The EY European Attractiveness Survey 2025 paints a different picture: Germany recorded 608 foreign direct investment (FDI) projects-a 17 % drop and the steepest decline among Europe’s top three. France led with 1,025 projects (down 14 %), followed by the U.K. with 853 (down 13 %). Across Europe, 5,383 projects were recorded in 45 countries in 2024-a 5 % decline, marking the second consecutive year of contraction.

The paradox has an explanation: mega-investments by AWS, Microsoft, and TSMC are inflating the volume, yet the breadth of FDI projects is shrinking. Germany is winning the big bets (semiconductors, cloud, artificial intelligence) while losing the smaller ones (mid-sized establishments, regional expansions). For the location, this is risky: when 80 % of the volume comes from just five investors, the dependency is extreme.

€23.2 bn

FDI volume 2024 (third-highest)

-17%

FDI projects (EY ranking)

~120 days

Operating permit (Southern Europe: under 40)

Sources: GTAI FDI Report 2024, EY Attractiveness Survey 2025, U.S. Department of State 2024

The Tech Billions: Why US Giants Are Betting Big on Germany

The investment sums pouring in from US tech giants into Germany are unprecedented. AWS alone plans to invest €8.8 billion by 2026 in the Frankfurt area and an additional €7.8 billion in the European Sovereign Cloud in Brandenburg. Microsoft is allocating €3.2 billion to double its AI and cloud capacities in Cologne and Elsdorf. Google intends to invest €5.5 billion in data centers by 2029. Apple has already poured €2 billion into its European Silicon Design Center in Munich, where more than 2,000 engineers are at work.

The latest coup: Nvidia and Deutsche Telekom announced a joint AI data center worth €1 billion in autumn 2025-the world’s first “Industrial AI Cloud.” SAP is the first major customer. For CFOs driving transformation, these investments mean Germany’s AI reboot infrastructure is being bankrolled not by domestic firms but by US giants viewing the German market as a springboard into Europe.

Why Germany over France or the Netherlands? Three decisive factors: the Frankfurt region as Europe’s most critical internet hub (DE-CIX), proximity to industrial customers (automotive, mechanical engineering, chemicals), and the predictable regulatory framework of German law. For cloud and AI investments, Germany is simply the market US giants must serve to reach European enterprise customers.

The economic impact is substantial: AWS estimates its investments alone will generate an additional €15.4 billion in GDP growth and support 15,200 local jobs annually. Data-center investments in Germany reached €12 billion in 2025, according to Bitkom. The German cloud market is expanding by 17 % to €20 billion. The question is no longer whether the money will arrive, but how Germany can ensure value creation stays in the country instead of being limited to the electricity bill.

TSMC Dresden: Europe’s Semiconductor Beacon

The European Semiconductor Manufacturing Company (ESMC) in Dresden is the largest industrial investment project in eastern Germany since reunification. The joint venture of TSMC, Bosch, Infineon and NXP-each holding a 10 % stake with a €500 million contribution-has a total volume exceeding €10 billion. The federal government is providing up to €5 billion in subsidies.

Construction is on schedule: groundbreaking in August 2024, office building inauguration in December 2025, structural shell complete, equipment installation slated for the second half of 2026. Production is set to begin in 2027-40,000 wafers per month (300 mm) in FinFET technology at 28/22 nm and 16/12 nm. For Dresden, already producing 40 % of all semiconductors made in Europe, ESMC confirms the cluster strategy: where infrastructure exists, more investors follow.

The flip side: Intel Magdeburg. The originally planned €30 billion chip plant was officially scrapped in July 2025. The federal government is now reclaiming the €10 billion in approved subsidies. The withdrawal underscores the fragility of large-scale foreign investment projects: a single investor decision can erase years of political groundwork. TSMC Dresden is succeeding-but Intel Magdeburg serves as a reminder that nothing is guaranteed.

Germany is winning the high-stakes bets on semiconductors, cloud and AI. Yet it is simultaneously losing foreign investment projects across the board. That is not a contradiction-it is the reality of a location that is strategically attractive yet operationally frustrating.

Why Investors Hesitate: The Four Location Weaknesses

The ifo Institute’s 2024 economist panel lays bare the shortcomings without mercy: 87 % of surveyed economists cite bureaucracy and regulation as a location weakness. 74 % point to energy costs. 67 % highlight inadequate digitalization. 60 % flag ancillary wage costs. These are not fringe opinions but a broad consensus within the economic-science community.

Concrete figures turn the abstract problem into tangible reality: companies in Germany wait on average about 120 days for an operating permit-under 40 days in Italy or Greece. That alone can decide a location choice when an investor is torn between Germany and the Netherlands.

The collapse of the chemicals sector is especially stark: foreign direct investment (FDI) in German chemicals has plummeted since 2018. BASF is investing less in Ludwigshafen and more in Zhanjiang (China). Post-war energy costs-after the loss of cheap Russian gas-have fundamentally altered the landscape for energy-intensive industries. For chemicals-historically one of the strongest FDI magnets-Germany is no longer a growth location. The skills shortage only compounds the issue.

Yet the counter-argument deserves attention: what frustrates investors also breeds confidence. A transparent legal and regulatory system, a solid industrial base, and a research-and-development landscape (Fraunhofer, Max Planck, Helmholtz) are location factors that France and the United Kingdom cannot match in this combination. TSMC chose Dresden not for permit speed but for the semiconductor cluster and partner ecosystem (Bosch, Infineon, NXP, GlobalFoundries in close proximity). AWS invests in Frankfurt for DE-CIX, not for the building code.

The pattern is consistent worldwide: investors accept location weaknesses when strategic advantages outweigh them. They simply price the weaknesses into higher return expectations. An investor waiting roughly 120 days for a permit in Germany demands better market conditions than in the Netherlands, where OECD averages are faster. Every day of delay carries a cost-and eventually that cost exceeds the strategic benefit. The chemicals slump shows this threshold has already been crossed for energy-intensive sectors. It has not yet arrived for tech and semiconductors-but tolerance there is also shrinking.

The Special Fund: €500 Billion as a Signal

On 22 March 2025, Federal President Steinmeier signed the constitutional reform for the €500-billion infrastructure fund: €300 billion for federal investments, €100 billion for the Climate and Transformation Fund, €100 billion for Länder and municipalities. Term: 12 years, debt-financed.

To international investors, the special fund is first and foremost a signal: Germany is investing in its infrastructure. The municipal investment backlog totals about €165 billion-schools, roads, digital networks. If this backlog is cleared, location quality improves measurably. Yet the Cologne Institute for Economic Research tempers expectations: 86 % of the funds merely replace existing budget items. Actual investment spending in 2025 was around €71 billion-only €2 billion more than in 2024.

For CEOs with international investor circles, this means the special fund works as a political signal but is not yet an operational lever. Institutional investors demand transparent project pipelines and predictable regulation as a condition for private capital. The relaunch of the “Made in Germany” brand must therefore address not only products but the location itself. Digitizing public administration-partly financed by the special fund-offers the highest return leverage: if Germany could cut permit lead times from 122 to 80 days, it would send a stronger signal to international investors than any subsidy.

What Germany Must Do: Three Strategic Levers

First: Radically accelerate approval processes. Around 120 days-three times longer than in Italy or Greece. This isn’t fine-tuned regulation; it’s a systemic flaw. Digital approval portals, standardized procedures, and binding processing deadlines aren’t luxury demands-they’re the bare minimum for a location competing for international investment.

Second: Make energy costs competitive. The collapse of 90 % of chemical FDI is a red flag. Without competitive energy prices, energy-intensive industries will continue to relocate. The special fund (Climate and Transformation Fund: €100 billion) must target renewable energy expansion and lower industrial electricity prices-not subsidies, but infrastructure that permanently cuts costs.

Third: Strengthen cluster strategy. TSMC is coming to Dresden because Dresden already has a semiconductor cluster. AWS is building in Frankfurt thanks to DE-CIX. The pattern is clear: investors go where an ecosystem already exists. Germany must deliberately reinforce its existing clusters (semiconductors in Dresden, cloud in Frankfurt, automotive in Stuttgart and Munich, chemicals in the Rhine-Main region) instead of spreading investments evenly across the country. The €735 billion of the Made-for-Germany initiative should finance this cluster approach.

Looking Ahead: What 2026 Holds

The pipeline for 2026 is promising. TSMC Dresden enters the equipment phase, AWS’s European Sovereign Cloud launches, and Nvidia/Telekom’s Industrial AI Cloud goes live. If these three projects deliver as planned, Germany will prove it can not only attract massive investment but execute it. After Intel’s withdrawal, that proof is more vital than ever.

For CEOs with international investor ties, the message is clear: Germany isn’t an easy location. Bureaucracy is real, energy costs are high, and approvals take too long. Yet Germany offers something no other European hub can match in this combination: industrial depth, research excellence, and a domestic market of 83 million people at the heart of Europe. The tech billions aren’t flowing despite the weaknesses-they’re flowing because the strengths outweigh them.

The task is twofold: politics must reduce the weaknesses so mid-market FDI projects grow again, and business must better communicate its strengths. Every successful project (TSMC in Dresden, Nvidia/Telekom in Berlin, AWS in Frankfurt) is a reference case that lures further investors. Every failed relocation (Intel Magdeburg) sets Germany back. The restart as a location succeeds only if execution becomes visible-not as a promise, but as a result. The next 18 months with TSMC, AWS Sovereign Cloud, and Industrial AI Cloud will reveal whether Germany can deliver on that execution.

Frequently Asked Questions

How high are foreign investments in Germany?

GTAI reports 1,724 projects of foreign direct investment (FDI) for 2024 with a volume of €23.2 billion – the third-highest figure ever recorded. The USA leads with 18 % of all projects. According to EY’s methodology, Germany ranks third in Europe behind France and the UK with 608 projects.

Why are US tech giants investing so heavily in Germany?

Three reasons: Frankfurt as Europe’s most important internet exchange (DE-CIX), proximity to industrial customers, and the predictable regulatory framework of German law. AWS, Microsoft, Google, and Nvidia are together investing more than €28 billion in German infrastructure.

What happened to Intel’s project in Magdeburg?

Intel officially cancelled construction of its €30 billion chip factory in July 2025. The €10 billion in public subsidies will be reclaimed. Reasons cited: insufficient customer commitments and financial risk for Intel. In contrast, the TSMC Dresden (ESMC) project is proceeding as planned.

What are Germany’s main weaknesses as an investment location?

Bureaucracy (87 % of economists see it as a weakness), energy costs (74 %), lack of digitalization (67 %), and labor costs (60 %). Operating permits take around 120 days – often under 40 in Southern Europe.

What impact will the €500 billion special fund have on FDI?

The special fund serves as a political signal but is not yet tangible in practice. IW Köln criticizes that 86 % of the funds merely replace existing expenditures. International investors demand transparent project pipelines as a prerequisite for private capital.