Microsoft is set to make a significant investment of €3.3 billion ($3.5 billion) in Germany, with a focus on enhancing its artificial intelligence (AI) capabilities. The investment, announced by Microsoft’s vice chair Brad Smith during an event in Berlin with Chancellor Olaf Scholz, aims to double the company’s AI and data center infrastructure in the country.

This move marks the largest single investment Microsoft has made in Germany in its 40-year history. The company plans to allocate the majority of this investment to the most populous state, North Rhine-Westphalia, indicating a strategic focus on expanding its presence in key regions of Germany.

Acknowledging Germany’s position as a leading technology powerhouse, Smith highlighted the country’s significant contributions to technological progress. However, he also pointed out a challenge faced by Germany—a shortage of AI skills. In response, Microsoft’s investment includes a comprehensive program to train up to 1.2 million individuals in new AI capabilities, aiming to bridge the skill gap and support the growth of Germany’s AI ecosystem.

Chancellor Scholz welcomed Microsoft’s commitment, emphasizing its importance in fostering progress, growth, and global openness. He sees this investment as a testament to Germany’s determination to maintain an open economy and its readiness to embrace technological advancements.

Microsoft’s decision to invest heavily in Germany aligns with its strategy to be closer to major customers, including pharmaceutical giant Bayer AG and energy company RWE. By enhancing its infrastructure in Germany, Microsoft aims to minimize data latency between data centers and applications, ensuring efficient and seamless operations for its clients.

While specific details about the investment’s allocation are yet to be revealed, Marianne Janik, CEO of Microsoft Germany, mentioned a focus on regions such as the western Rhineland and around the banking hub of Frankfurt. These locations are strategically chosen to strengthen Microsoft’s proximity to key customers and optimize its service delivery.

The announcement comes at a crucial time for Germany, as it grapples with economic challenges worsened by global slowdowns. However, with significant investments from tech giants like Microsoft, along with recent pledges from the German government towards AI development, the country’s AI ecosystem is poised for growth.

Microsoft’s commitment underscores its confidence in Germany’s potential and its role as a key market for technological innovation. As the company doubles down on its investment in AI, it signals not only a boost for Germany’s tech sector but also a step towards addressing the broader challenges of skill development and economic revitalization.