From Asia to Europe, from Alibaba to SAP, the soaring market value amidst macroeconomic challenges stands as the best testament to the deterministic power of AI. On May 27, 2025, a groundbreaking announcement connected two tech giants across continents: China’s Alibaba and Germany’s SAP. The latter, a European software behemoth, has seen its market capitalization surge dramatically over the past year, fueled by robust growth in its AI business, making it Europe’s most valuable company. As the largest constituent of the German DAX index, SAP has propelled the index to record highs despite Germany’s weakening economic fundamentals.
Under the collaboration 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, dictating investor sentiment and capital flows. SAP’s AI Surge: Defying Economic Headwinds to Lead DAX to New Heights? Over the past year, SAP has shone in European capital markets. While its AI advancements haven’t sparked the same frenzy as Alibaba’s early-year surge, SAP’s strategic focus on AI has quietly elevated it to Europe’s most-watched star stock. By 2025, its year-to-date stock price had risen 25%, with a 60% gain over the past 12 months, pushing its market capitalization above €300 billion and cementing its position as Europe’s most valuable company. As the highest-weighted stock in the DAX, SAP’s strong performance has been instrumental in driving the index to historic peaks. The DAX’s robust performance—an 18.85% rise in 2024 and a 15.96% gain by early May 2025—stands in stark contrast to Germany’s broader economic struggles. The German economy contracted by 0.2% in 2024, with the European Commission forecasting stagnation in 2025. Export pressures loom, and unemployment risks a slight uptick. This divergence raises a critical question: Is SAP’s and the DAX’s tech-led outperformance a sign of AI-driven assets decoupling from macroeconomic fundamentals, or merely an anomaly in a unique context? The capital market’s faith in AI appears to be rewriting 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 to SAP Business Suite, reportedly reducing migration time by 35%. Bank of America analysts note that Joule’s cross-platform capability is pivotal to SAP’s vision of becoming a “Suite as a Service” provider, while Morgan Stanley highlights 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 consolidate and manage vast amounts of data from both within and outside SAP systems, particularly unstructured data through partnerships like Databricks. SAP projects the BDC market to reach $300 billion by 2028, with a 24% CAGR, and initial market feedback has been overwhelmingly positive, setting records for new product launches. Morgan Stanley views BDC as a “critical strategic move” for SAP, addressing its historical shortcomings in heterogeneous data integration, while Bank of America Securities hails it as a “game-changer” with “above-expectation” 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 lead as a “Suite as a Service” provider.Currently, 34,000 customers have adopted SAP’s commercial AI solutions, with over 230 generative AI scenarios delivered, and a target of reaching 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 collaborations with companies like Perplexity and Palantir, SAP is continuously expanding its AI capabilities to build an open and robust AI ecosystem.
AI is reshaping SAP’s financial narrative, with clear plans to translate AI investments into tangible business value and financial returns. SAP’s AI commercialization model is evolving from initial AI unit-based pricing to a hybrid model, including per-user monthly fees (ranging from €7 to €70 for premium AI services). More importantly, AI is deeply integrated into SAP’s financial goals and growth expectations: SAP anticipates that its €11 billion could potentially (previously expected at 2-3x), with AI-enhanced cloud products being pivotal to achieving this target. 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 reach around 35% by 2026/2027, with AI driving both revenue growth and margin expansion. Morgan Stanley notes that SAP’s efforts to improve profitability are “far from over.” AI-driven efficiency gains within SAP, such as a 30% improvement in operational efficiency and up to 30% in R&D productivity, directly enhance profitability. Both Morgan Stanley and Bank of America Securities view AI as the core driver of SAP’s growth and valuation. Morgan Stanley projects 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 narrative. At the recent Sapphire annual conference, positive market reactions were evident, with strong customer attendance and partners expressing optimism about SAP’s technological direction and demand recovery. Bank of America Securities stated, “SAP’s robust product pipeline and positive partner feedback further bolster our confidence.”Morgan Stanley noted, “Post 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’s multiples remain reasonable versus global peers, with ~25% earnings growth expected to drive further 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 as a global operator. SAP’s revenue and growth drivers are worldwide, with its enterprise software—especially AI-powered—addressing universal pain points in efficiency, innovation, and data management. These needs transcend any single economy’s cycles. While the DAX is Germany’s benchmark index, it includes multinationals like SAP whose fortunes hinge on global trends. Germany’s subdued economy ironically underscores AI’s thematic strength. Deeper analysis reveals SAP’s aggressive AI investments serve dual purposes: offensive growth and defensive moat-building. Cloud-native, AI-first startups pose disruptive risks, but by embedding AI (e.g., Joule and BDC) into core suites and cloud offerings, SAP aims to lock in its vast client base and raise switching costs to niche AI rivals. Morgan Stanley’s “the suite strikes back” observation highlights SAP’s renewed emphasis on integrated suites’ AI-era advantages—deploying AI within unified systems proves far more efficient than fragmented setups. Thus, SAP’s AI strategy not only seeks new revenue but also fortifies its billion-dollar legacy business against native challengers. Financial gains stem from 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 accelerate globalization, particularly in the internationalization of AI products and model deployment, which aligns closely with the goal of expanding regional markets through the SAP partnership.
In the long term, 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. More significantly, this alliance 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 capabilities and cloud infrastructure, the partners can provide more accessible and demand-driven AI solutions for enterprises across these regions. AI: The “Certainty” in Capital Markets? AI has evolved from a cyclical trend to a profound structural shift redefining investment logic and corporate futures. Even for traditional tech giants like SAP, the post-AI potential and competitive moats are expanding rapidly. The Alibaba-SAP collaboration exemplifies an emerging “new consensus”—as AI R&D and deployment grow increasingly complex, partnerships become critical for innovation risk-sharing. Notably, both SAP and Alibaba have achieved market capitalization growth against macroeconomic headwinds, demonstrating AI’s deterministic power. This article originally appeared on the WeChat public account “Hard AI.” For more AI frontier insights, visit the source. Risk Disclosure: Markets involve risks; invest prudently. This content does not constitute personal investment advice nor considers individual users’ specific objectives, financial situations, or needs. Users should assess whether any opinions or conclusions herein align with their circumstances. Investment decisions bear sole responsibility.
