The thesis

SAP SE operates in the Software, Cloud & AI Platforms theme with its core ERP platform, SAP S/4HANA. The company is in a macro moment driven by AI Buildout, with a +20 signal from AI Capex growth. Despite a dormant conviction tier score of 0/100, SAP's 9.4% YoY revenue growth and 73.16% gross margin indicate a strong financial position. The analyst consensus rating is BUY, with a P/E of 26.9x.

Why now

The US government's push to 'Buy American Chips' and Broadcom CEO's statement on AI demand being held back by infrastructure constraints make AI Buildout a timely opportunity for SAP. The company's strong revenue growth and margins position it to capitalize on this trend.

What to watch

SAP's ability to incorporate AI into its S/4HANA platform and drive further revenue growth will be key indicators over the next 1-3 quarters. The company's gross margin trajectory and any updates on AI-driven customer wins or partnerships will also be important to monitor.

Key risks

SAP's high P/E of 26.9x poses a valuation risk if revenue growth slows. Execution risk is also present if the company fails to integrate AI capabilities into its ERP platform effectively. Macro risk arises from potential regulatory changes in AI, as hinted at by the US government's involvement in G20 talks.

Theme exposure