Palantir Technologies Inc. (NASDAQ:PLTR) faces a potential setback in Europe as France and Germany begin seeking alternative suppliers for military software, raising questions about the company’s long‑term position in the region.

 "To foster data sovereignty, France and Germany will examine the development of a European sovereign digital backbone," the two countries said in a joint declaration on Friday. They will take "consideration of data-centric security, artificial intelligence, and cloud solutions from both countries," the nations said after talks between Chancellor Friedrich Merz and President Emmanuel Macron. 

The statement pointed to the French Arcadia solution "as well as comparable German solutions." The French Army has tested Arcadia in exercises as a replacement for the Maven Smart System developed by Palantir, Defense News reported. 

Europe is considering reducing its dependence on the US for defense and tech amid growing strain with Washington. Disagreements over Ukraine, ongoing US military operations against Iran, and trade tensions have pushed the region to turn to domestic alternatives.

US contractors, including Palantir, Lockheed Martin Corp. (NYSE:LMT) and RTX Corp. (NYSE:RTX), are watching European governments accelerate defense spending.

Arcadia Emerges as Europe’s Alternative to Maven 

France has pitched Arcadia to European partners as an AI-powered military command-and-control platform. The French have developed the system with local companies including Mistral AI, Safran.AI, Thales SA (OTC:THLLY) and Airbus SE (OTC:EADSY).

Palantir’s Maven is a flagship US military AI program used for battlefield intelligence and targeting. It processes drone and sensor imagery to support real-time decision-making. Palantir said in June that it "welcomes the opportunity to integrate with Arcadia, or any other national system."

The two nations also said they would create a "European collaborative combat standard." This would allow European fighter jets, combat drones and other aircraft developed by different countries to communicate and fight together. 

"We will develop a secure framework based on an open and modular architecture, shared interfaces and the exploration of common technological solutions providing sovereign, interoperable and scalable information sharing," they said. 

US Downplays Europe Defense Rethinking

The US has downplayed efforts by European nations to reduce their reliance on American technology and weapons.

"There is a lot of commentary that, due to alleged frustrations with the US, the American defense industrial base will lose out on the market for weaponry," US Undersecretary of Defense Elbridge Colby posted on X on Tuesday. "But this is neither feasible nor accurate." 

Colby argued that there currently is "no alternative country or countries" that can compete with the US defense industrial base, "either in quantity or quality." 

"American companies are at the forefront of advanced technology," Colby said. "There is no credible free world alternative to American tech and its implications for defense." 

Europe Faces Setbacks

Despite Europe’s intentions, the region has faced considerable setbacks to its military efforts. Europe’s joint defense programs have failed due to diverging national requirements, industrial rivalries over leadership/workshare, and shifting political priorities. 

France and Germany terminated in June the €100 billion Future Combat Air System (FCAS) program. Mediation failed to resolve a dispute between Dassault Aviation (OTC:DASTY) and Airbus about how work and intellectual property would be split. 

The FCAS aimed to replace the countries’ Eurofighter and Rafale aircraft starting from 2040.

France and Germany repeated on Friday their support for a stock-market listing of tank-maker KNDS, provided market conditions are right, and both governments agree. They will jointly promote harmonized operations and innovation, helping KNDS further deliver customer-focused solutions and expand exports to partner countries.