By OpenAI COO’s own admission last February, “we have not yet really seen AI penetrate enterprise business processes.” But for enterprise software giant SAP, whose stock has dropped significantly in 2026 in part from the “SaaSpocalypse,” the issue is still front and center.
On Monday, the European heavyweight announced its intention to acquire German AI startup Prior Labs for an undisclosed amount. Pending regulatory approval, SAP plans to invest €1 billion (approximately $1.16 billion) into the business over the next four years to grow it into an AI lab focused on structured data — the tables and databases where enterprise information typically sits.
SAP declined to disclose how much it spent on the acquisition itself, but sources told Pathfounders that this was a healthy exit: an “almost all cash” deal, with well over half a billion dollars in cash up front for the startup’s founders — Frank Hutter, Noah Hollmann, and Sauraj Gambhir.
The trio co-founded Prior Labs just 18 months ago with a focus on tabular foundation models (TFMs) — AI models that can make predictions from data that sits in tables and databases. This is potentially a better fit for enterprises than language models. It is certainly a better fit for SAP, whose widely used software products for accounting, HR, procurement and expense management rely on its database.
However, Germany’s most valuable company also seems to be playing defense as the tech industry marches toward agentic AI. While it works to create its own AI lab, the company has blocked OpenClaw and any other agent tech that it has not explicitly authorized, The Information was first to spot.
In response to a request for comment, SAP’s press department referred TechCrunch to the company’s latest API policy, which does say that SAP “prohibits” AI agents from accessing its products through its API except for those that are “SAP-endorsed architectures.”
Authorized architectures of course include SAP’s own offering, Joule Agents, still in beta, which lets customers create their own agents. Nvidia also announced in March that SAP’s Joule supports Nvidia’s Agent Toolkit, which is software for managing agents. This toolkit is the foundation for Nvidia’s enterprise-ready, security-focused method for deploying OpenClaw, NemoClaw. Hence SAP customers will be authorized to use NemoClaw agents.
For a giant incumbent player like SAP, AI is both a threat and an opportunity. "It’s all about how quickly [we can] as SAP actually also embark [on] these technologies in our R&D portfolio to keep the relative economies of scale advantage," CFO Dominik Asam told CNBC in January.
SAP hasn't been sitting on its hands. The German company invested in generative AI companies that develop language models large and small: In 2023, it backed OpenAI rival Anthropic — as well as Aleph Alpha and Cohere, which now intend to merge to form “a global AI powerhouse.”
It had also developed SAP-RPT-1, a relational pretrained transformer model. “Early on, SAP recognized that the greatest untapped opportunity in enterprise AI wasn’t large language models; it was AI built for the structured data that runs the world’s businesses,” SAP CTO Philipp Herzig declared in a statement.
But Prior Labs’ acquisition is a significant shortcut in that direction. Its TabPFN model series has experienced a lot of traction among developers. In a blog post on the deal, the startup’s founders said that its open source models have been downloaded over three million times.
In a press release, SAP promised that Prior Labs will maintain the open source versions: "The lab will operate as an independent unit to ensure research velocity while SAP provides long-term investment and a direct path to productization across the SAP portfolio with SAP AI Core and SAP Business Data Cloud as well as the agentic layer with Joule."
SAP and the startup headquartered in Freiburg, Germany, hope that this investment will lead to TFMs that can grab data in the tables where it lives, combine that with language, reasoning, and domain knowledge.
More than that, they hope that Prior Labs, with this “massive boost” from SAP, can become a new "globally-leading frontier AI lab for structured data — in Europe, in the open," founder and CEO Frank Hutter celebrated in a post on X.
In February 2025, the startup had previously raised some $9.3 million in a pre-seed funding round led by Balderton Capital — more than competitor Neuralk-AI, but a lot less than Fundamental, which emerged out of stealth with a $255 million Series A in February.
In a post on X, Balderton partner James Wise called Prior Labs\' acquisition “one of Germany’s biggest ever venture outcomes.” As for SAP, its stock is currently trading slightly upwards.
Meanwhile, SAP is being very strict as to the agents it will allow into its ecosystem. This is a wildly different approach than Salesforce, another incumbent caught in the SaaSpocalypse. It is allowing enterprise to choose their own agents, including OpenClaw if they so wish, with its new Headless 360 architecture.
To understand the strategic significance of this acquisition, one must appreciate the central role structured data plays in enterprise operations. Companies across industries store vast amounts of information in relational databases and spreadsheets – from customer records and inventory logs to financial transactions and employee data. While large language models have captured public imagination, their ability to handle tabular data remains limited. Tabular foundation models like Prior Labs’ TabPFN are designed specifically for this purpose, offering higher accuracy and efficiency when making predictions on structured datasets.
The development of TabPFN traces back to research conducted by Frank Hutter and his team at the University of Freiburg. Prior to founding Prior Labs, Hutter established a strong reputation in the machine learning community for pioneering work in neural architecture search and AutoML. His academic background, combined with the complementary expertise of Noah Hollmann (a PhD candidate specializing in uncertainty quantification) and Sauraj Gambhir (an experienced product leader), created a powerful blend of research and commercialization.
The startup’s technology stands out because it replaces traditional model training with a transformer-based approach that can make zero-shot predictions on new tables without requiring task-specific fine-tuning. This dramatically reduces the time and compute resources needed for enterprise AI deployment. The open-source availability of TabPFN has accelerated adoption among data scientists and developers, fostering an ecosystem of plugins and integrations that further enhance its utility.
SAP’s investment is not just about acquiring technology, but also about securing talent and establishing a strong quantitative research presence in Europe. The new AI lab, based in Freiburg, will operate semi-autonomously, preserving the startup culture while leveraging SAP’s vast customer base and distribution network. This structure mirrors successful models like Google’s acquisition of DeepMind, where the acquired company maintained its identity while benefiting from industrial resources.
The timing of the deal is critical. The enterprise software industry is facing what some analysts have dubbed the “SaaSpocalypse” – a period of compressed valuations, slowing growth, and margin pressures exacerbated by macroeconomic headwinds. SAP’s stock has dropped significantly in 2026, reflecting these broader market forces. By doubling down on AI, SAP aims to create new revenue streams and differentiate its offerings, potentially reversing its stock’s downward trajectory.
The decision to block most AI agents except NemoClaw reveals SAP’s cautious approach to security and compliance. As enterprise data becomes increasingly accessible through APIs, the risk of unauthorized access or data leakage grows. SAP’s restricted policy ensures that only agents adhering to its security standards can operate within its ecosystem. NemoClaw, backed by Nvidia’s enterprise-grade security tools, meets these standards while offering advanced agent capabilities.
This strategy contrasts with Salesforce’s more permissive stance. Salesforce’s Headless 360 architecture allows businesses to run any agent, including OpenClaw, on top of its platform. This open approach fosters innovation but introduces security complexities. SAP’s closed approach prioritizes control and safety, potentially appealing to risk-averse industries like finance and healthcare.
Beyond the immediate acquisition, SAP’s broader AI strategy includes continued investment in LLMs and mergers. The potential merger between Aleph Alpha and Cohere could create a formidable European AI player, and SAP’s early investments position it to benefit from this consolidation. The company is also heavily promoting its Joule AI assistant, which now integrates with Nvidia’s Agent Toolkit, bringing agentic AI to SAP’s 400,000 customers.
Industry observers are watching closely to see whether SAP’s bet on Tabular AI pays off. If successful, Prior Labs could become the cornerstone of a new product line, potentially generating billions in revenue from predictive analytics, automated reporting, and intelligent process automation. However, the company faces intense competition from cloud giants like Microsoft and Google, who are also developing tabular AI solutions. Microsoft’s Azure Machine Learning includes automated tabular modeling, while Google’s AutoML Tables offers similar features.
The European tech ecosystem celebrates this deal as a validation of its deep tech startup ecosystem. Prior Labs’ exit, which is among Germany’s largest venture outcomes, signals that the region can nurture world-class AI companies from inception to acquisition. It also strengthens Europe’s bid to become a leader in AI for enterprise, an area where regulatory frameworks like the EU AI Act provide both challenges and opportunities.
As SAP integrates Prior Labs, the immediate steps include expanding the team, scaling compute resources, and developing a product roadmap. The company has committed to maintaining open-source releases, ensuring that the developer community continues to benefit from TabPFN innovations. Long-term, the lab aims to create a unified foundation model capable of handling all forms of structured data, rivaling the capabilities of LLMs in their domain.
The move also has implications for the broader generative AI market. While LLMs have dominated headlines, investors are increasingly looking for applications that solve concrete business problems. Tabular AI addresses a massive, underexploited market – every company with a spreadsheet or database stands to benefit. This could trigger a wave of mergers and acquisitions as tech giants scramble to acquire specialized AI talent and intellectual property.
SAP’s next earnings report will provide early indicators of whether the market rewards this strategy. Already, the stock has shown signs of recovery, trading slightly upward on the announcement. For SAP executives, the goal is to regain investor confidence by demonstrating that they can leverage AI to drive growth and margins, even as the SaaSpocalypse reshapes the industry.
Ultimately, the Prior Labs acquisition represents a high-stakes gamble. SAP is investing over a billion dollars in a startup that has existed only 18 months, albeit with world-class research. The success of this venture will depend on execution, cultural integration, and the pace of technological advancement. If it works, SAP could cement its position as the leading AI platform for enterprise structured data. If it fails, the company will have to look elsewhere to reverse its fortunes.
Source: TechCrunch News