SAP has experienced a significant resurgence, with its stock price soaring to new heights and CEO Christian Klein recognized as “Manager of the Year 2024.” This turnaround follows a strategic shift towards cloud services and AI, transforming the company from a traditional software provider. Currently valued at €300 billion, SAP surpasses major automotive manufacturers and is instrumental in elevating the DAX index. However, its growth presents challenges regarding regulatory caps on index representation, raising speculation about a potential move to the New York Stock Exchange.
SAP’s Remarkable Comeback: A Journey of Transformation
SAP is currently enjoying unprecedented success, with its stock price reaching all-time highs and CEO Christian Klein being honored as “Manager of the Year 2024” by the “Handelsblatt.” This marks a significant turnaround from October 2020, when Klein, then just 40, was forced to revise the company’s medium-term goals. Consequently, the stock value took a nosedive, and SAP, based in Baden-Württemberg, was labeled as a candidate for restructuring.
Klein’s vision involved a strategic shift from being a traditional software provider focused on business processes to embracing the role of a cloud service provider, all while gearing up for the era of artificial intelligence (AI). This forward-thinking strategy has proven fruitful, resulting in a remarkable tripling of SAP’s stock price. The achievements were particularly evident in the last year, although they now pose a challenge: SAP’s size has made it too large for the German stock index, DAX. Speculation is mounting about a potential move from the Frankfurt Stock Exchange to New York.
Market Dominance and Future Prospects
Currently valued at €300 billion, SAP stands as the most valuable publicly traded German company, surpassing the combined worth of major car manufacturers like Mercedes-Benz, BMW, Porsche, and Volkswagen. Even the second and third largest companies in the DAX, Siemens and Deutsche Telekom, fall short of SAP’s market capitalization. CFO Dominik Asam attributes this success to both the company’s strategic decisions and the broader economic restructuring, as highlighted during the recent presentation of strong financial results.
The IT sector today plays a significantly larger role in the global economy compared to decades past. In 1980, IBM was the sole representative among the top ten most valuable corporations. By 2000, that number had risen to four with the inclusion of Intel, Microsoft, Cisco Systems, and Nokia. Now, eight of the top ten are IT-focused, including Tesla.
Shareholders have much to celebrate, as SAP shares surged by approximately 75% last year and have already increased by over 10% in early 2025. The recent announcement by U.S. President Donald Trump regarding substantial investments in AI infrastructure has further propelled the stock, highlighting SAP’s growing focus on generative AI, positioning it to compete effectively with American rivals like Oracle.
Investors in the DAX have also benefited from SAP’s success, which has played a vital role in lifting the index past the 20,000-point milestone for the first time in its nearly 36-year history, soon followed by a breakthrough over 21,000 points. However, this success presents a dilemma for the Deutsche Börse and potentially for SAP itself.
The DAX imposes a regulatory cap that limits any individual stock’s weight within the index. Until recently, the threshold was set at 10%, increased to 15% last year. This change was influenced by the departure of Linde, the then-most valuable German company, from the Frankfurt listing to the U.S. market.
Without such caps, investors could face concentration risks as a stock’s influence grows. Furthermore, some fund managers can only allocate a maximum of 10% of their portfolios to a single stock for risk management purposes, making the recent increase to 15% less than ideal for many. Currently, SAP has surpassed this cap, representing over 16% of the index.
This cap not only affects investor strategies but also impacts the companies involved. If a stock reaches a 20% share, it could be limited to a 15% representation in investment funds, potentially hindering its performance relative to peers.
The Deutsche Börse faces a complex challenge, similar to those encountered by other global exchanges. For instance, ASML holds a 20% weight in the Dutch index but is capped at 15%. Meanwhile, Switzerland’s leading index, SMI, comprises major companies like Nestlé and Roche with substantial weights. Nevertheless, CFO Asam reassures that multiple criteria beyond the cap influence listing decisions, suggesting that a departure from the DAX is not on the immediate horizon.
However, if SAP’s growth trajectory continues and is reflected in its stock price, this could change. CEO Klein anticipates a revenue increase of 11 to 13 percent in the cloud and software sectors for 2025, along with significant double-digit growth in operating profits, largely driven by the AI trend. As an interface between businesses and technology, SAP is well-positioned to leverage this momentum, with 34,000 of its 400,000 customers already utilizing AI applications—a trend that is likely to expand further.
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