Note that OpenAI is under pressure from the EU to do something about using user data. https://www.technologyreview.com/2023/04/19/1071789/openais-...
Walling itself off isn't going to help. Europe is going to get crushed if they don't aggressively participate. The AI outside the walls will evolve very quickly and drastically, while everything inside the walls moves at a highly regulated snail's pace. Over a short amount of time it'll put the EU at a large disadvantage, not least of all in labor/talent (which will abandon the EU even faster than it already does, to pursue the best opportunities at the highest pay).
You already are seeing the likes of Adobe using legally-sourced imagery as a key selling point. I imagine the bigger momentum is going to come from companies who want to know what liabilities they have for using the tools.
The approach doesn't work and it indicates a lot of bad thinking regarding new tech. Which explains why SAP is one of the biggest technology companies in Europe, and they're small compared to the US giants now.
Case in point: Salesforce sales 2020: $17b; SAP sales 2020: $27b. Salesforce sales last four quarters: $31b; SAP sales last four quarters: $30.8b.
Microsoft can unleash a hundred billion dollars of capital investment at AI. Which companies in Europe can and will do that? None. Instead you'll get Macron touting a $30 billion government collaboration program on AI, which will take ten years to get anywhere, and will accomplish nothing in the end.
There are few areas of tech that Europe isn't left in the dust by the US and China. The US is still the world's pre-eminent superpower and it fully intends to aggressively utilize AI to keep its advantages (and it will, just as it did with each era of tech). There's nothing EU bans will do to stop that, it merely provides further advantage to the US as it battles to dominate AI. The giant cloud leaders will have a huge advantage to begin with, so Europe is starting off in a bad way regardless.
Only thing you forgot is Macrons powers of persuasion will surely just convince the USA and China to give France equal footing. Pretty sure after he single handedly ends the Ukraine war he’ll get right on it.
The data they gather is also important to them as GP pointed out. They're getting novel data to train on that their competitors can't.
On top of all that, they're in an arms race with competitors. They're winning right now, but they could end up losing out.
If I were OpenAI, I'd have a long hard think about whether to play hardball here or not. Right now, it looks like they may get to pick winners and losers. I can think of at least a couple of countries that would probably be willing to make up the difference in revenue for a degree of control over the product.