No Level 1 Clearance for AI?

The artificial intelligence landscape witnessed a seismic shift this week as French AI startup Mistral AI raised €1.7 billion ($2 billion) in its latest funding round, achieving a valuation of €11.7 billion and cementing its position as Europe's most valuable AI company. This massive investment, led by Dutch chip equipment maker ASML, represents far more than just another Silicon Valley-style funding round, it's a declaration of technological independence and a blueprint for national AI sovereignty.

Meanwhile, Australia finds itself at a crossroads, grappling with a fundamental question:

Are we building our own AI future, or are we content to become digital tenants in someone else's technological empire?

France's Strategic AI Investment: More Than Just Money

The latest funding round gives Mistral an 11.7 billion-euro valuation, becoming the most valuable AI company in Europe and boosting Europe's AI ambitions as the continent's most credible rival to US giants OpenAI, Meta, and Alphabet's Google. This isn't merely about competing on valuation metrics, it's about ensuring European data, European decision-making, and European values remain under European control.

Mistral's success story began with a clear mandate: develop open-source AI models that could challenge American dominance while keeping European data within European borders. The company's approach to AI sovereignty has resonated with investors who understand that in the age of artificial intelligence, data ownership equals national power.

The investment comes as European AI startups gain unprecedented momentum, with European AI companies securing 55% more year-on-year investment in Q1 2025. This surge isn't accidental, it's the result of deliberate policy decisions and strategic investments that prioritize technological self-reliance.

Australia's AI Paradox: Building Without Foundations

Australia presents a puzzling contradiction in the global AI landscape. A recent government report identified 1,533 AI companies contributing to Australia's AI ecosystem, including 1,121 private companies and 412 public companies, with 110 new businesses founded in 2023 or 2024. The country is experiencing a hiring boom for AI managers and engineers, with companies across sectors scrambling to build AI capabilities.

Yet beneath this veneer of AI activity lies a troubling reality: most Australian companies are building on foundations they don't own. While French companies like Mistral develop their own large language models and core AI infrastructure, Australian firms largely integrate existing American platforms, essentially becoming sophisticated resellers of foreign technology.

The irony is stark. Amazon announced plans to invest AU$20 billion from 2025 to 2029 to expand its data center infrastructure in Australia, positioning itself as the backbone of Australia's digital economy. While this infrastructure investment is welcome, it highlights Australia's role as a customer rather than a creator in the AI revolution.

The Security Clearance Conundrum

Perhaps nowhere is Australia's AI contradiction more apparent than in its approach to security clearances and technology access. The Australian government maintains rigorous security clearance requirements for personnel working on sensitive projects, with multiple classification levels from Protected to Top Secret. These clearances can take months to obtain and require extensive background checks, reflecting genuine concerns about national security and data protection.

Yet this same government appears comfortable allowing critical AI infrastructure to be controlled entirely by foreign entities. We've created a system where an Australian citizen needs months of security screening to access certain government databases, but the AI systems processing that same sensitive information are designed, trained, and controlled by companies headquartered thousands of kilometers away.

This represents a fundamental misunderstanding of where the real security risks lie in the modern digital economy.

Consider this recent job posting that perfectly encapsulates the contradiction:

Here we have a role requiring NV1 clearance, yet the job explicitly requires expertise in Microsoft's cloud platforms. The irony is stark: we need months of background checks to verify the consultant is trustworthy, but we're comfortable having them manage sensitive government data using platforms designed, controlled, and potentially accessible by foreign entities.

Personnel security remains important, but technological sovereignty, controlling the fundamental systems and algorithms that process our most sensitive information, may be even more critical.

The Hidden Costs of AI Strategy Dependency

Australia's reluctance to invest in core AI capabilities comes with hidden costs that extend far beyond economics. When we rely entirely on foreign AI platforms, we cede control over:

• Data Governance: Every query processed, every document analyzed, every decision supported by AI creates data trails that flow to foreign servers under foreign legal jurisdictions.

• Algorithmic Transparency: We have no insight into how the AI systems making critical decisions actually work, what biases they might contain, or how they might be updated or modified. Are we ready to apply American biases to Australian contexts? Are we all comfortable with that?

• Strategic Autonomy: In times of geopolitical tension, countries that control critical AI infrastructure gain significant leverage over those who merely consume it.

• Innovation Capacity: By focusing on integration rather than creation, Australia risks hollowing out its technical capabilities, becoming unable to innovate even when national interests demand it.

The French Example: Strategic Investment Over Integration

Australia doesn't need to match Mistral's €1.7 billion funding round, but the contrast in approach is telling. Where France invests in building its own foundational AI capabilities, Australia focuses primarily on integrating existing foreign platforms.

The implications of this divergence are becoming clearer. France is developing indigenous AI models that can operate under French legal frameworks and reflect European values. Australia, meanwhile, continues to build expertise in deploying American-designed systems, creating a growing dependence on foreign technology infrastructure.

Consider what different approaches might yield: investment in Australian-controlled foundation models, even if smaller and more specialized than global competitors; requirements that certain government and critical infrastructure AI processing occur on domestically-controlled platforms; universities and research institutions focusing on fundamental AI research rather than just applications.

The government's National AI Capability Plan, due by the end of 2025, represents an opportunity to address these questions. But the early signals suggest a continued emphasis on adoption and upskilling rather than core technology development and ownership.

Beyond Silicon Valley: Australia's AI Strategy Options

The global AI landscape is rapidly evolving beyond the traditional Silicon Valley model. European AI companies secured 55% more year-on-year investment in Q1 2025, according to Dealroom, with 12 European startups achieving unicorn status in the first half of the year. Countries and regions worldwide are recognizing that AI leadership requires more than just consuming American platforms, it requires building indigenous capabilities.

Australia isn’t starting from scratch. We already have world-class universities producing cutting-edge AI research, research institutions with strong international reputations, and a robust legal system trusted globally. Add to that a strategic position between Asia and the US, and Australia has the foundations of a unique bridge economy in AI.

What’s missing isn’t talent or infrastructure, it’s the strategic will to scale these strengths into sovereign capability. With coordinated investment, Australia could specialize in areas aligned with national priorities, like AI for water management, energy transition, agriculture, or defense logistics, fields where our expertise and geography give us a natural advantage. The opportunity isn’t to compete head-on with US tech giants, but to build sovereign, high-impact niches that serve Australian interests first.

Conclusion: The Stakes Couldn't Be Higher

Mistral's €1.7 billion funding round represents more than a business success, it's a statement about the kind of future Europe wants to build. It demonstrates that with strategic vision, coordinated investment, and political will, smaller players can carve out meaningful space in the AI ecosystem without simply becoming dependencies of larger powers.

Australia stands at a similar crossroads.

The current path, hiring AI managers to implement foreign platforms while maintaining elaborate security clearances for personnel but not technology, leads to a future of digital dependency.

The alternative path, investing in indigenous AI capabilities, even at smaller scale, leads to a future where Australia maintains some measure of control over its digital destiny.

The choice is ours, but the window for making it is rapidly closing. In the age of artificial intelligence, technological sovereignty isn't a luxury, it’s a prerequisite for maintaining genuine national independence.