How does CADA relate to the Chips Act (Regulation 2023/1781)?

As proposed, the Cloud and AI Development Act (CADA) links data centre deployment to the EU's semiconductor strategy by rewarding projects that integrate c

Summary As proposed, the Cloud and AI Development Act (CADA) links data centre deployment to the EU's semiconductor strategy by rewarding projects that integrate chips, processors and accelerators designed and/or manufactured in the Union. Article 14(1)(d) lets the Commission designate a data centre as a "strategic project" where it supports the integration of such EU components, thereby contributing to the objectives of CADA and of Regulation (EU) 2023/1781 (the Chips Act). The aim is to strengthen the Union's semiconductor supply chains and reduce critical external dependencies. CADA is a proposal and not yet in force.

Detail

The proposed CADA and the Chips Act (Regulation (EU) 2023/1781) are distinct but connected. The Chips Act focuses on the production, design and resilience of semiconductor value chains; CADA focuses on deploying the computational infrastructure — data centres and cloud services — that consumes those semiconductors. CADA bridges the two through its framework for data centre strategic projects.

The strategic-project criterion: Article 14(1)(d)

Under Article 14(1), the Commission may, by decision, designate as strategic projects data centre projects selected through open calls for expressions of interest that fulfil at least two of the listed criteria. One of those criteria is the direct legal link to the Chips Act, Article 14(1)(d):

"(d) the project supports the integration of chips, processors and accelerators, servers or quantum computers designed and/or manufactured in the Union into data centre systems or data centre facility management, thereby strengthening the Union semiconductor, quantum and data centre supply chains and contributing to the objectives of this Regulation and of Regulation (EU) 2023/1781;"

This criterion does two main things:

Supply-chain strengthening: It incentivises operators to procure hardware from EU-based designers and manufacturers, creating a demand-side pull so that capacity built under the Chips Act has a viable local market and reducing reliance on third-country hardware.
Technological sovereignty: By naming quantum computers alongside chips, processors and accelerators, it reflects the EU's aim of sovereignty across the digital stack, from silicon to cloud service.

Broader context: cloud stacks and EU hardware

The relationship goes beyond Article 14. As proposed, the Cloud and AI Leadership Initiatives (Title II) would support EU hardware development. Article 4 lists actions including to "develop AI-optimised servers and baseline software based on processors, accelerators and quantum accelerators designed and manufactured in the Union."

The recitals reinforce this. Recital 14 states that the Cloud and AI Leadership Initiatives should "facilitate the development of AI-optimised servers and software including processors and accelerators manufactured and designed in the Union, such as those developed under Regulation (EU) 2026/XXX … of the European Parliament and of the Council." That referenced upcoming Regulation (EU) 2026/XXX is identified elsewhere in the recitals as the "Chips Act 2.0" on a framework of measures for strengthening Europe's semiconductor ecosystem (for example Recitals 27 and 31). In other words, the proposal anticipates the Chips Act's evolution and aims for co-design and cross-optimisation of hardware and software — while the Chips Act in force today remains Regulation (EU) 2023/1781.

By designating projects that integrate EU chips as strategic, CADA aims for a flywheel effect: the Chips Act secures the supply of advanced semiconductors, while CADA helps ensure a sovereign infrastructure ready to deploy them.

What this means for you

For CTOs, architects and SMEs assessing this legislation, the CADA/Chips Act intersection presents both compliance considerations and strategic opportunities.

For data centre operators and developers If you plan a large-scale EU deployment, consider Article 14(1)(d) during feasibility and procurement. To rely on this criterion, your project must support integration of EU-designed and/or EU-manufactured chips, processors or accelerators (or servers or quantum computers).

Procurement strategy: Prioritise suppliers that can evidence EU design or manufacturing origin, potentially engaging EU-based fabless designers or foundries supported by the Chips Act.
Funding eligibility: Strategic-project status can open doors to support measures and Union funding, but designation is competitive and you would need to demonstrate the relevant criteria (recalling that at least two must be met).

For semiconductor and hardware manufacturers

Market access: CADA would create a structured demand signal. EU-made chips, processors and accelerators become more attractive to developers seeking strategic-project status.
Partnerships: Work with operators to document how your hardware integrates into their systems — useful evidence for the Article 14(1)(d) criterion.

For SMEs and cloud service providers

Sovereign cloud offers: As public procurement shifts toward higher Union assurance levels (Article 16), the broader push for EU hardware may give providers using EU-made infrastructure a competitive edge in high-sovereignty bids.
Innovation support: Watch the Cloud and AI Leadership Initiatives; projects combining AI software with EU-made hardware may receive targeted support.

Common misconceptions

CADA mandates the use of EU chips for all data centres. Incorrect. As proposed, CADA does not require all EU data centres to use EU-made semiconductors. It creates an incentive: only projects seeking strategic-project status under Article 14 would rely on this criterion (one of at least two they must meet). Others can continue to use third-country hardware but may miss the associated benefits.

The Chips Act and CADA are the same regulation. They are separate instruments. The Chips Act (Regulation (EU) 2023/1781) is in force and addresses the semiconductor industry. CADA is a proposal (COM(2026) 502 final) addressing cloud, AI and data centre deployment. They complement each other; CADA does not replace or amend the Chips Act.

Any EU-based company qualifies as "EU-designed or manufactured." Article 14(1)(d) refers to components "designed and/or manufactured in the Union," which points to the location of design or production, not merely an EU sales presence; applicants would need to substantiate origin.

This is general information about a draft EU regulation, not legal advice.