From Asia to Europe, from Alibaba to SAP, the surge in market value despite macroeconomic challenges stands as the best testament to the deterministic power of AI. On May 27, 2025, a groundbreaking announcement connected two tech giants from Asia and Europe: China’s Alibaba and Germany’s SAP. Over the past year, SAP, the European software powerhouse, has seen its market value soar due to robust growth in its AI business, becoming Europe’s most valuable company. As the largest constituent of Germany’s DAX index, SAP has propelled the index to record highs despite weakening economic fundamentals.
Under the cooperation agreement, SAP will explore integrating the Tongyi Qianwen large language model and support enterprises in deploying SAP ERP Cloud and SAP ERP Private Cloud editions on Alibaba Cloud. The two companies will jointly expand their enterprise customer base, initially focusing on China and gradually extending to Southeast Asia, the Middle East, and Africa. SAP’s continuously rising stock price underscores that AI remains the core “narrative theme” in capital markets, driving investor sentiment and capital flows. SAP’s AI Surge: Leading the DAX to Defy Economic Headwinds? Over the past year, SAP has stood out in European capital markets. While its AI advancements haven’t sparked the same frenzy as Alibaba’s earlier in the year, SAP has quietly emerged as Europe’s most-watched star stock through its AI strategy. By 2025, its year-to-date stock price had risen by 25%, with a 60% surge over the past 12 months, pushing its market capitalization above €300 billion and making it Europe’s most valuable company. As the highest-weighted stock in the DAX, SAP’s strong performance has been pivotal in driving the index to historic highs. The DAX has shown remarkable strength, rising 18.85% in 2024 and gaining another 15.96% by early May 2025. However, this market exuberance contrasts sharply with Germany’s overall economic stagnation. The German economy contracted by 0.2% in 2024, and the European Commission predicts stagnation in 2025, with export pressures and a slight rise in unemployment risk. This disparity raises questions: Is the stellar performance of SAP and the DAX, led by tech stocks, a sign of AI-driven assets decoupling from macroeconomic fundamentals, or merely an anomaly in a specific context? The capital market’s faith in AI appears to be forging a new valuation logic.SAP stands out in the AI wave due to its clear AI strategy and a series of innovative products.
Joule – The Ubiquitous AI Assistant: Joule is SAP’s flagship generative AI tool, designed to boost user productivity by 30%. Its uniqueness lies in its ability to integrate not only within SAP’s application ecosystem but also across platforms like ServiceNow, Gmail, and LinkedIn, aiming to become an “omnipresent, proactive AI assistant.” Additionally, Joule accelerates the migration process to SAP Business Suite, reportedly reducing migration time by 35%. Bank of America analysts highlight Joule’s cross-platform capability as a key component of SAP’s vision to transform into a “Suite as a Service” provider, while Morgan Stanley emphasizes its 30% productivity improvement target. Business Data Cloud (BDC) – The Data Foundation for AI: If Joule represents the application layer of AI, Business Data Cloud (BDC) serves as the data backbone of SAP’s AI strategy. BDC’s core value lies in helping enterprises integrate and manage vast amounts of data from both within and outside SAP systems, particularly unstructured data through partnerships with companies like Databricks. SAP projects the BDC market to reach $300 billion by 2028, with a 24% annual growth rate, and early market feedback has been overwhelmingly positive, setting records for order reserves. Morgan Stanley views BDC as a “critical strategic move” for SAP, addressing its historical shortcomings in heterogeneous data integration. Bank of America Securities hails BDC as a “game-changer,” noting its “exceeding expectations” in market demand. SAP’s Broader AI Vision and Ecosystem: SAP’s AI ambitions extend beyond Joule and BDC. The company has adopted an “AI Everywhere” strategy, aiming to become a leader in “Suite as a Service.”Currently, 34,000 customers have adopted SAP’s commercial AI solutions, with over 230 generative AI scenarios delivered, and plans to reach 400 by year-end. SAP has also launched the AI Foundation platform, aiming to establish it as an operating system for AI development and operations. Through partnerships with companies like Perplexity and Palantir, SAP is continuously expanding its AI capabilities, building an open and robust AI ecosystem.
AI’s financial impact on SAP is reshaping its narrative. AI investments must translate into tangible commercial value and financial returns, which SAP has clearly outlined. Its AI commercialization model is evolving from initial AI unit-based pricing to a hybrid model, including per-user monthly fees (premium AI services range from €7 to €70 per month). More importantly, AI is deeply integrated into SAP’s financial goals and growth expectations: SAP anticipates that its €11 billion legacy support service revenue could transform into over 5x cloud service revenue (previously projected at 2-3x), with AI-enhanced cloud products being pivotal. AI’s contribution to the “Rule of 40” (where revenue growth rate plus profit margin equals or exceeds 40%) is also critical. SAP aims to achieve around 35% by 2026/2027, with AI driving both revenue growth and margin expansion. Morgan Stanley notes that SAP’s margin improvement efforts are “far from over.” AI adoption within SAP has also yielded significant efficiency gains, such as a 30% operational efficiency boost and up to 30% R&D efficiency improvement, directly enhancing profitability. Both Morgan Stanley and Bank of America Securities view AI as the core driver of SAP’s growth and valuation re-rating. Morgan Stanley forecasts SAP’s EPS growth to reach 17-18% in FY2026/2027, with potential to exceed 20%. Market feedback and analyst consensus highlight the appeal of SAP’s AI story. At the recent Sapphire annual conference, positive market reactions were evident. “The long-lost enthusiasm has returned,” with strong customer attendance and partners expressing optimism about SAP’s technological direction and demand recovery. Bank of America Securities stated post-event: “SAP’s ambitious product pipeline and positive partner feedback further bolster our confidence.”Morgan Stanley noted, “Following the Sapphire conference, we have greater confidence in SAP’s near-term demand and its ability to sustain accelerated revenue and profit expansion,” ranking SAP as the “top pick” in Europe’s software sector.
The strong AI narrative is supporting SAP’s elevated valuation. Morgan Stanley believes SAP’s current ~37x 2026 forward P/E aligns with its growth prospects. Bank of America Securities added that despite a valuation rebound, SAP remains reasonably priced versus global peers, with ~25% earnings growth expected to drive further stock upside. The so-called “German economic anomaly” reflects less SAP’s detachment from local conditions and more the borderless appeal of its AI-enhanced solutions. SAP’s revenue drivers are global – its enterprise software, supercharged by AI, addresses universal pain points in efficiency, innovation and data management. These needs transcend any single country’s economic cycle. While the DAX is Germany’s benchmark index, it includes multinationals like SAP whose fortunes correlate with global trends. Germany’s muted economy ironically highlights AI’s thematic power. At depth, SAP’s aggressive AI investments represent both offensive growth and defensive moat-building. Cloud-native AI-first startups pose disruptive threats. By deeply embedding AI (e.g., Joule, BDC) into core suites and cloud offerings, SAP aims to lock in its enterprise base and raise switching costs to niche AI rivals. Morgan Stanley’s “suite strikes back” observation underscores SAP’s renewed emphasis on integrated suite advantages in the AI era – deploying AI within unified systems proves far more efficient than across fragmented solutions. Thus, SAP’s AI strategy not only pursues new revenue but fortifies its billion-dollar core business against native-AI challengers. The financial uplift reflects this dual success in value creation and defense.The collaboration between Alibaba and SAP will initially focus on deep integration in technology and market expansion. Beyond product-level cooperation, the two companies will jointly explore new market opportunities. Alibaba Group CEO Wu Yongming previously stated that Alibaba Cloud is making strategic investments to drive globalization, accelerating the internationalization of AI products and the overseas deployment of models. This aligns closely with the goal of expanding regional markets through the partnership with SAP.
In the long term, the significance of the Alibaba-SAP collaboration extends far beyond immediate business synergies. It could foster a more diversified global AI landscape and establish robust regional AI ecosystems. The partnership aims to deliver “scalable, secure, and intelligent solutions tailored to local business needs” for markets in China, Southeast Asia, the Middle East, and Africa. Moreover, this collaboration between industry giants may accelerate the “AI transformation” of traditional industries in emerging markets. By combining SAP’s industry-specific software with Alibaba’s AI technologies and cloud infrastructure, the two companies can provide more accessible and demand-driven AI solutions for businesses in these regions. AI: The “Certainty” in Capital Markets? AI is no longer just a cyclical trend in capital markets but a profound, structural shift redefining investment logic and corporate futures. Even for traditional tech giants like SAP, the potential and competitive moat of “+AI” are growing rapidly. The Alibaba-SAP collaboration is not an isolated case; it reflects an emerging “new consensus.” As AI R&D and deployment grow increasingly complex, partnerships are becoming critical for sharing innovation risks. Meanwhile, SAP and Alibaba have demonstrated resilient market capitalization growth despite macroeconomic challenges, serving as a testament to the deterministic power of AI. This article is sourced from the WeChat public account “Hard AI.” For more AI frontier insights, visit the original source. Risk Disclosure and Disclaimer: Markets involve risks; invest with caution. This article does not constitute personal investment advice nor considers individual users’ specific investment objectives, financial situations, or needs. Users should evaluate whether any opinions, views, or conclusions herein align with their circumstances. Investments made based on this content are at the investor’s own risk.