There is no reason that EU should "fall behind". The danger with digital tech has almost nothing to do with the capabilities and features of the technology (well if its a nuclear bomb its features are very specific) and has everything to do with who controls it and why.

The implication that there is only one way to organize control of AI tech is patently false. We already know that you can have at least i) a state controlled system (China) and ii) an oligopolistic corporate controlled system (US). There are many other plausible ways and the EU must simply create the conditions for these to develop.

Legislation that has real teeth and vision can do this. This is possible even within existing corporate and monetary systems. Even the (controversial) Friedman doctrine about corporation's sole aim is seeking profit is that they must operate with the moral and legal sandbox that society creates.