• Christian Klein, head of German software giant SAP, says Europe risks falling behind the U.S. and China if it ends up overregulating the AI sector.
• "If you only regulate technology in Europe, how can our startups here in Europe ... compete against the other startups in China, in Asia, in the U.S.?" Klein said.
• Instead, he argues businesses need a more harmonized, pan-European approach to pressing issues like the energy crisis and digital transformation — and less regulation overall, not more.

Europe should avoid regulating artificial intelligence and focus its attention on the results of the technology instead, the CEO of German enterprise tech giant SAP told CNBC Tuesday.

Christian Klein, who has held the top job at SAP since April 2020, said Europe risks falling behind the U.S. and China if it overregulates the AI sector.

While it's important to mitigate the risks associated with AI, Klein argued that regulating the tech while it's still in its infancy would be misguided.

"It's very important that how we train our algorithms, the AI use cases we embed into the businesses of our customers — they need to deliver the right outcome for the employees, for the society," Klein said on CNBC's "Squawk Box Europe" Tuesday.

"If you only regulate technology in Europe, how can our startups here in Europe, how can they compete against the other startups in China, in Asia, in the U.S.?" Klein added.

"Especially for the startup scene here in Europe, it's very important to think about the outcome of the technology but not to regulate the AI technology itself."

Instead, Klein argued, businesses need a more harmonized, pan-European approach to pressing issues like the energy crisis and digital transformation — and less regulation overall, not more.

Upbeat earnings

His comments came after SAP reported bumper third-quarter earnings late Monday. Shares of the software vendor jumped more than 4% to a record high.

The software giant posted total revenue of 8.5 billion euros ($9.2 billion) for the quarter, up 9% year-over-year as sales related to cloud products jumped 25%.

SAP raised its 2024 outlook for cloud and software revenue, operating profit and free cash flow. The German firm has been working toward a transition to cloud computing over the last decade.

In 2016, SAP acquired Concur, the business travel and expenses platform, in a bet that software would move to the cloud.

More recently, SAP has made AI a big focus of its strategy as it looks to reposition itself for faster growth after higher interest rates and macroeconomic headwinds dented tech spending and led to industry-wide layoffs.

In January, SAP announced a restructuring plan affecting over 7% of its global workforce — or the equivalent of 8,000 roles.