The selloff in software stocks on concern that generative artificial intelligence will crush their profits may have gone too far, with global enterprise software company SAP emerging as one unfairly punished example, according to Bank of America. In a Wednesday note, analysts at the bank acknowledged very real risks that generative AI poses to traditional software companies, including the threat of new tools and newer competition, which pressure prices. But analyst Frederic Boulan believes that investors use this slump as an opportunity to accumulate those companies with insulated businesses that remain attractive. Innovative software incumbents are in the best position to build high-value AI agents by leveraging their proprietary datasets, something unavailable to general large language models, Boulan wrote. “Software companies are not equal in front of AI risks. Deep domain expertise and business integration are hard for new entrants to replicate, making complex, mission‑critical platforms like SAP less vulnerable as they embed GenAI using proprietary customer data,” the analyst wrote. “Although we believe some segments of the tech ecosystem are bound to be profoundly impacted by Gen AI, we see current levels as attractive for stocks like Buy-rated SAP with strong moats and potential AI upside.” The software rout has left SAP, headquartered in Germany but traded in the New York Stock Exchange, priced as though it will suffer a growth shock, or a sharp reset in growth expectations, that is unlikely to occur, Boulan added. “Assuming no changes to our current 2026-2030 forecasts (c. 11% revenue CAGR, c. 15% EBIT CAGR), we estimate the current share price reflects -3% revenue CAGR post 2030, a 14% reduction to 2035, driving a 20% EBIT decline. This would require both a pick up in churn from existing customers (which we view as unlikely) and a stop to the on-premise to cloud migration, which remains less than half way completed,” he wrote. Boulan added that as SAP has made business AI the core of its product strategy, he expects benefits in both revenue and from cost savings. “The ‘GenAI will kill Software’ narrative has strongly taken hold in the last 6 months,” Bank of America wrote Wednesday. Over that span, SAP American Depositary Receipts have slumped 30%, and are down 19% this year alone. Boulan’s $308 price target implies upside of 56% from current levels.
