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Software group SAP has overtaken Danish drugmaker Novo Nordisk to become Europe’s most valuable company, in the latest milestone for Germany’s surging stock market.

SAP shares rose 1.4 per cent on Monday, lifting its market capitalisation to €313bn, just above that of Novo Nordisk, whose shares dipped 1.3 per cent.

Shares of SAP have risen more than 40 per cent in the past year as investors have welcomed the shift of its business customers to the cloud, and the group has ridden the wave of enthusiasm for artificial intelligence. Gains for SAP have helped power a rally in Frankfurt’s blue-chip Dax index that has seen it outperform most of the world’s major stock markets.

Novo Nordisk has lost half its market value since last summer as it struggles to convince investors that it has a big follow-up to its blockbuster GLP-1 anti-obesity drugs.

“Novo has been a hot stock in the past but what we are seeing now is that the hype has come down. At the same time, SAP is benefiting a lot from inflows into German equities,” said Emmanuel Cau, an analyst at Barclays.

SAP last year replaced Dutch semiconductor equipment manufacturer ASML as Europe’s largest technology company.

Based in the town of Walldorf in south-west Germany, SAP now makes up a bigger proportion of the German index than the country’s historic car sector, which includes Volkswagen and Mercedes-Benz.

SAP’s weighting in the Dax has repeatedly breached a 15 per cent cap, prompting Deutsche Börse to introduce a new uncapped version of the index last month.

Founded by five former IBM employees in 1972, SAP has in recent years made progress in shifting its model away from selling on-premise software licences towards cloud service contracts, a more predictable and lucrative business.

Analysts expect SAP’s cloud revenue to increase by 29 per cent this year, while overall revenue is forecast to rise by 13 per cent to €38.5bn.

Analysts have also highlighted the potential of a new product that SAP unveiled last month, which allows customers to connect their data with third-party data and analyse them through AI-powered agents.

Although the company’s shares are down nearly 10 per cent from last month’s all-time high, its rivals for the position of most valuable company have fallen more sharply.

Novo Nordisk, which has vied with French luxury group LVMH for Europe’s top spot over the past two years, this month published a second set of worse than expected trial results for CagriSema, a potential successor treatment to Ozempic and Wegovy. 

Novo’s uncertain product pipeline has complicated a success story that saw sales of its existing obesity drugs surge more than 50 per cent last year.