SAP to Invest 200 Billion Euros in AI, Fortify European Data Moat

SAP SE, the highest market value company in Europe and a leading German software giant, has announced a significant investment of 200 billion euros over the next decade. This strategic move is aimed at strengthening its position in the artificial intelligence (AI) era and fortifying its regional data moat against the competitive pressures from the three major American tech giants. The investment will be directed towards Europe's "sovereign cloud," a move that underscores SAP's commitment to enhancing its AI capabilities and data security within the region.

This investment will significantly expand SAP's sovereign cloud product portfolio, including the launch of a new Infrastructure as a Service (IaaS) platform. This platform will be developed and operated using open-source technology within SAP's data center network. The core selling point of this business is ensuring that data for clients such as European governments is stored within the European Union, complying with the EU's General Data Protection Regulation (GDPR) restrictions on data cross-border transfers.

SAP also offers sovereign cloud deployment services, providing cloud infrastructure operated by SAP in data centers owned or designated by the client. This ensures that the data remains within the EU, adhering to stringent data protection laws.

While 200 billion euros may not seem astonishing to investors accustomed to American tech giants investing hundreds of billions in AI, it represents a substantial leap for a European tech giant. Historically, SAP's investment in "European sovereign cloud" was 20 billion euros last September, primarily used to expand its collaboration with Microsoft's Delos cloud service. This service, which combines Microsoft's cloud software with SAP's data centers, aims to legally protect cloud service data from access by U.S. authorities.

In contrast, American tech giants are also aggressively expanding their self-operated European cloud computing services. For instance, Microsoft's president announced plans to increase the capacity of its European data centers by 40% over the next two years, resulting in over 200 data centers across 16 European countries.

SAP's board member responsible for customer service and delivery emphasized that innovation and sovereignty must go hand in hand. The ability for European enterprises to access the latest technological advancements, such as AI, in a fully autonomous and controllable environment is crucial.

Over the past few years, geopolitical tensions have prompted countries to reassess their reliance on foreign technology, making technological sovereignty a growing concern. This has led global cloud computing giants like Amazon, Microsoft, and Google to increase their investments in Europe's "sovereign cloud," adding more computational infrastructure within the region.

From a broader technological perspective, the EU still lags behind the current global standards in AI technology. To address this, the European Commission launched the "AI on the Continent" initiative at the beginning of this year, allocating 200 billion euros to build "AI super factories" equipped with the most advanced computational capabilities.

SAP has reiterated its commitment to participating closely in the construction of these new data centers but has clarified that it will not be the lead partner in this initiative. Earlier this year, SAP stated that it does not intend to operate or invest in large AI factories within the EU but is exploring how to become a technology and software supplier for these large data centers.