The benefits of generative AI to business are so huge that companies will gladly pay more for enterprise software that incorporates the technology, SAP CEO Christian Klein tells Axios' Ina Fried in the first of our new interview series.

• That, he says, is because when you merge generative AI with the types of information SAP's system stores, you can find ways to reduce inventory, boost sales and even improve carbon emissions.

Klein points to German retailer Schwarz Group, which is using everything from historical business data to consumer sentiment to inflation data and weather forecasts — in conjunction with generative AI — to better predict demand at its Lidl and Kaufland stores.

• The result has been 15% better inventory management, a 20% decrease in waste and even an uptick in total sales due to having the right products on shelves.
• "It's incredibly powerful," says Klein, who joined SAP as a student in 1999 and has worked his way through the executive accounting ranks before being named chief operating officer in 2016 and co-CEO in 2019. He became the sole CEO a year later.

Yes, but: Klein says that businesses who have their data spread across many silos will need to better organize that information before they can get such benefits.

• "Without that AI will have only minimal positive impact," he said.

Catch-up quick: Germany-based SAP is the largest non-U.S.-based software maker in the world, specializing in helping large and midsize businesses handle complex tasks including human resources, sales, inventory and supply chain management.

• The 50-year-old company has 400,000 customers across 130 countries and says that 80% of the world's business transactions touch their systems in one way or another.

Between the lines: As home to so much business data, SAP sees itself as having a leg up when it comes to generative AI, even if many of the AI algorithms are coming from other firms.

• Klein also sees advantages in being a German company, with that country's strong belief in data protection and data sovereignty, topics he said are especially relevant in the AI age.
• Both SAP and Germany as a whole are trying to engage in a delicate balance when it comes to China, aligning with the U.S. and other allies on national security issues without forgoing business opportunities there entirely. "We all benefited from globalization," he said. "I just see [it] as a little bit of a backward trend right now."

Klein sees generative AI catalyzing SAP's own business in three ways.

1. SAP plans to charge 30% more, on average, to customers who use its AI features.
2. It sees AI doubling the size of SAP's addressable market, which Klein says should reach $1 trillion by 2028.
3. Finally, SAP is using AI as a carrot to convince businesses that are running SAP or other software on their own servers to move to an SAP cloud subscription. That's because it is only offering the AI features as part of its cloud.

The big picture: SAP is not alone in seeing the opportunity created by merging generative AI and business data.

• Microsoft, with its OpenAI partnership, is adding "copilots" to almost all of its products, typically for an extra fee. Microsoft said last week it will charge $30 per user per month for the co-pilot that accompanies Office tools such as Word, PowerPoint, Outlook and Excel.
• Salesforce, too, has been adding generative AI capabilities across its business products.

The latest tech boom is highly concentrated: 60% of new generative AI job postings are located in just 15 metro areas — with San Francisco topping the list, per a new Brookings Institution report.

Why it matters: Generative AI may produce "winner-takes-most" economic outcomes, per the authors of the Brookings report, unless government moves to foster a more broadly distributed AI sector.

Details: Nearly half of the generative AI job postings in the past year were in San Francisco, San Jose, New York, Los Angeles, Boston and Seattle. That extends previous trends in AI jobs and R&D.

By the numbers: The 43 U.S. members of of the Forbes AI 50 list — a showcase of the promising AI companies — come from just four states.

• The winning states are California (35), New York (4), Texas (2) and Massachusetts (1), with one company operating fully remotely.
• None of the top 50 AI startups are in a rust belt state, the Midwest or the South.
• San Francisco alone is home to 20 of the best-funded AI companies — more than the rest of America combined.
• 18 out of 55 members from an alternative list, the IVP Enterprise 55, are San Francisco-based.

Be smart: U.S. high-tech industries have become increasingly concentrated in coastal cities in recent decades.

• While more than 100 metro areas have the potential to be AI centers, just 14 metro areas account for more than half of AI R&D investment.
• Ensuring workers with AI skills are spread across the country is critical to making the CHIPS and Science Act work, Zoë Baird, senior counselor at the U.S. Department of Commerce, told the Aspen Security Forum, because "innovation takes place where manufacturing happens."
• Hours after Baird's comments, TSMC, the world's biggest semiconductor manufacturer, announced it would delay the planned opening of its Arizona plant because of shortages of skilled labor.

What they're saying: Report authors Mark Muro, Julian Jacobs and Sifan Liu suggest that a "widely distributed" expansion of public sector AI research and access to computing is needed to spread AI benefits away from "superstar cities."

Yes, but: It's early days in generative AI deployment, and wider deployment and adoption across the economy are likely to spread at least some of the economic benefit.

• A National Artificial Intelligence Research Institutes program is now operating in 19 cities, helping to build up AI talent pools.

A national network of leading tech companies launched a $25 million campaign Monday to educate lawmakers and the public about the positive aspects of AI, per an announcement shared exclusively with Axios' Ashley Gold.

Why it matters: As AI fervor bubbles over in Washington, tech wants to make sure narratives about dangers and pitfalls don’t overpower what it sees as the boundless promise and potential of the new technology.

Details: TechNet — whose members include Amazon, Apple, Google, Meta and Snap — is launching "AI for America," pouring $25 million into a public affairs campaign that will include Capitol Hill events, digital and TV advertising and coalition-building.

• On Tuesday, TechNet is hosting an event on the Hill supporting the campaign featuring Rep. Jay Obernolte and AI leaders.

Between the lines: To heed off any onerous legislation, tech needs to do a full-court press to convince people AI isn't all scary.

• Last week at the White House, leading AI companies made voluntary commitments to responsible AI development.
• Hill leaders, led by Senate Majority Leader Chuck Schumer, are devising a legislative framework for AI, while the Biden administration promises more regulation.

What they're saying: "Too much of the conversation recently has been focused on hypotheticals rather than how AI is being used," TechNet CEO Linda Moore said in a statement.

• Worldcoin, Sam Altman's global project to create a crypto-backed identity system by scanning every human face, launched today, but not in the U.S. (Financial Times)
• On tap: BSA is holding an AI Capitol Hill briefing today.
• The next application for chip-making technology is miniaturizing and improving tiny loudspeakers in earbuds and other devices — which are beginning to be manufactured like microchips. (Wall Street Journal)

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