Without protection, a EU hyperscaler will never emerge. It's not that any hypothetical future EU hyperscaler would be an inherently less competitive. It's just plain old first mover advantage. Cloud computing is a VERY sticky good, and once folks got on AWS/Azure no matter how good your product is there's no way larger customers are going to migrate off to some "risky" startup (thus keeping scale small).
Source: I worked on a sovereign cloud PaaS in Germany. Admittedly the project was a disaster, hiring talent in the infrastructure space here is really tough. Probably mostly due to a lack of opportunities to acquire experience domestically and noncompetitive wages limiting migration of those with experience.
Gaia-X is a total dumpster fire though, perfect example of what's wrong with the EU. All the money was spent paying bureaucrats, consults, and standards committee folks to architecture astronaut and design by committee sovereign cloud "standards" bullshit bingo. None of the money went to the engineers.
We should really copy the Chinese approach here, straight out clone a subset of the best/most popular parts of AWS/Azure/GCP. I'm open to contracting opportunities in this space BTW (email in profile).