German software giant SAP has found itself at the centre of a stock market storm that has wiped out a staggering $130 billion from its market capitalisation in recent months. The company’s shares fell on Wednesday to levels not seen since August 2024, a brutal correction from record valuations in February 2025. While the scale of the declines is dramatic, more important is the reason for this sell-off: a growing concern on Wall Street and in Europe that artificial intelligence – hitherto seen as a catalyst for growth – could become a deflationary force for traditional software providers.
SAP’s current valuation of €233 billion (down from €344 billion at its peak) reflects investor scepticism about the sustainability of margins in the generative AI era. Angelo Meda, portfolio manager at Banor SIM, clarifies this fear, pointing out that the issue is not the survival of the company, but the value of its services in the new reality. With AI, the creation and replication of software modules becomes cheaper and faster, which raises the risk of a decrease in the average selling price of services and the number of hours invoiced. In this context, accelerating cloud transformation ceases to be just a strategic objective and becomes a defensive necessity.
However, the market situation is creating an interesting paradox. Sentiment around the software sector has rarely been so low, and SAP’s valuation is approaching a historical bottom, which for many could be a buying signal. While the S&P 500 software index has lost more than 7% since the beginning of 2026 and the technical charts are still generating sell signals, some institutional investors are starting to take long positions.
Everyone is now looking forward to the financial results that the company will publish next week. After October’s forecasts, which placed cloud revenues at the lower end of expectations (while operating profit was strong), the upcoming report will be a reality test. It will show whether the market has over-discounted the threat of AI, or whether we are witnessing a sustained re-evaluation of the enterprise software sector, where ‘old’ business models must give way to new efficiencies.
