IBM Stock Plummets 13% Amid AI Disruption Fears
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy IBM?
Source: Fool
- Significant Stock Drop: IBM's stock fell over 13% on Monday, wiping out approximately $31 billion in market capitalization due to fears that AI technologies could disrupt its COBOL tech stack, although shares saw a modest recovery of 2.7% by afternoon.
- Threat from AI Tools: Anthropic's blog highlighted that AI tools could modernize COBOL-based systems, raising investor concerns about IBM's mainframe sales, which accounted for 23% of the company's total revenue last year.
- Slowing Revenue Growth: Despite IBM's revenue reaching $67.5 billion last year, an 8% annual increase, its sales and earnings growth are more moderate compared to other tech companies, with projected currency-adjusted revenue growth of about 5% this year.
- Cash Flow Projections: IBM anticipates free cash flow of approximately $15.7 billion for the year, reflecting a 7% annual increase, but uncertainties regarding the impact of AI technologies on its consulting and software businesses may lead investors to adopt a cautious outlook on future growth.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy IBM?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on IBM
Wall Street analysts forecast IBM stock price to rise
16 Analyst Rating
11 Buy
4 Hold
1 Sell
Moderate Buy
Current: 223.350
Low
210.00
Averages
315.80
High
375.00
Current: 223.350
Low
210.00
Averages
315.80
High
375.00
About IBM
International Business Machines Corporation is a provider of global hybrid cloud and artificial intelligence (AI) and consulting expertise. The Company’s segments include Software, Consulting, Infrastructure and Financing. The Software segment includes hybrid cloud and AI platforms, which allow clients to realize their digital and AI transformations across the applications, data, and environments in which they operate. The Consulting segment focuses on integrating skills on strategy, experience, technology and operations by domain and industry. The Infrastructure segment is focused on the hybrid cloud infrastructure market, providing on-premises and cloud-based server and storage solutions. In addition, it offers a portfolio of life-cycle services for hybrid cloud infrastructure deployment. The Financing segment provides client and commercial financing, facilitating its clients’ acquisition of hardware, software and services. It helps clients in more than 175 countries.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
US Equity Benchmarks Post Largest One-Day Gains in Over Two Weeks
- Market Rebound: Major US equity benchmarks recorded their largest one-day gains in over two weeks on Tuesday, indicating a significant improvement in market sentiment likely driven by investor optimism regarding economic recovery.
- Increased Trading Volume: The rise in the stock market was accompanied by a notable increase in trading volume, suggesting heightened investor participation, which may signal a restoration of market confidence and potential for further gains ahead.
- Sector Performance Divergence: While the overall market rose, different sectors exhibited varied performances, with technology and consumer goods stocks leading the gains, reflecting investor preferences for specific industries and the diversity of market choices.
- Economic Data Impact: The market rebound may have been influenced by recent positive economic data, enhancing investor expectations for future economic growth, thereby driving stock prices higher and improving overall market sentiment.
See More
IBM Stock Plummets 13% Amid AI Disruption Fears
- Significant Stock Drop: IBM's stock fell over 13% on Monday, wiping out approximately $31 billion in market capitalization due to fears that AI technologies could disrupt its COBOL tech stack, although shares saw a modest recovery of 2.7% by afternoon.
- Threat from AI Tools: Anthropic's blog highlighted that AI tools could modernize COBOL-based systems, raising investor concerns about IBM's mainframe sales, which accounted for 23% of the company's total revenue last year.
- Slowing Revenue Growth: Despite IBM's revenue reaching $67.5 billion last year, an 8% annual increase, its sales and earnings growth are more moderate compared to other tech companies, with projected currency-adjusted revenue growth of about 5% this year.
- Cash Flow Projections: IBM anticipates free cash flow of approximately $15.7 billion for the year, reflecting a 7% annual increase, but uncertainties regarding the impact of AI technologies on its consulting and software businesses may lead investors to adopt a cautious outlook on future growth.
See More
IBM Shares Plummet Amid AI Product Concerns
- Significant Stock Drop: IBM shares plummeted on Monday, marking the largest decline in 26 years, primarily due to concerns over Anthropic's Claude Code product's ability to translate COBOL, raising fears about IBM's legacy business.
- Self-Disruption Capability: Despite the market's reaction, Jefferies analyst Brent Thill noted that IBM is already disrupting itself with the watsonx Code Assistant for Z, which uses generative AI to refactor COBOL into Java, modernizing applications effectively.
- Software Reacceleration: Thill emphasized that IBM's software reacceleration hinges not just on mainframes but on broader momentum across hybrid cloud, AI, automation, and data, showcasing the company's strategic positioning in these areas.
- Mainframe Business Growth: Contrary to negative market perceptions, Thill pointed out that IBM's mainframe business is growing, with 70% of clients expanding their workloads, and mainframes continue to handle approximately 73% of global transactional volumes, underscoring their critical role across industries.
See More
AI Expected to Trigger Productivity Boom and Economic Growth
- AI's Potential: Cathie Wood of ARK Invest forecasts that AI will trigger an explosive growth in productivity, accelerate real GDP growth, and lower inflation, indicating a strong optimism about the future economy.
- Market Reaction: Investor sentiment has fluctuated due to concerns over potential economic disruptions from AI, leading to a selloff in cybersecurity stocks, which highlights the market's sensitivity to new technologies.
- COBOL Modernization: Anthropic announced Claude Code's COBOL capabilities, which are expected to reduce the modernization timeline from years to quarters, causing IBM's shares to tumble over 13%, reflecting the market's rapid response to technological changes.
- Unemployment Rate Forecast: Citrini Research predicts that unemployment rates could rise to 10.2% within the next two years and forecasts a 38% decline in the S&P 500 by 2028, which would have significant implications for the consumer economy.
See More
Market Rebound: Impact of AI and Tariff Policies
- Market Recovery: Tuesday's session marked a partial recovery from Monday's broad sell-off, with the S&P 500 rising 0.8%, the Dow Jones up 0.93%, and the Nasdaq Composite increasing by 1.1%, indicating a restoration of investor sentiment and market stability.
- AI Influence: Anthropic's event proved less threatening than anticipated, positioning Claude as an orchestration layer that integrates with existing tools like DocuSign and Salesforce, leading to a 4% rise in their shares, reflecting a positive market response to collaboration and integration.
- Tariff Policy Uncertainty: Trump's increase of the global tariff rate to 15% and the Supreme Court's ruling against emergency powers tariffs have created investor uncertainty regarding future effective tariff rates, putting pressure on growth stocks and high-risk investments while increasing market volatility.
- Long-Term Trend Intact: Despite current market fluctuations, all three major indexes are up over 13% in the past 52 weeks and are within 3% of their end-of-2025 levels, indicating that the long-term upward trend remains intact, with investors needing to watch Nvidia's upcoming earnings report for potential market impacts.
See More
Analysis of Stock Price Movements for Multiple Companies
- Dillard's Revenue Decline: Dillard's reported fourth-quarter revenue of $1.99 billion, falling short of the $2.03 billion expected by analysts, leading to a 7% drop in shares, primarily due to winter storms impacting over a third of its stores, highlighting the significant effect of seasonal weather on retail performance.
- Planet Fitness Weak Guidance: Planet Fitness anticipates full-year adjusted earnings per share growth of only 9% to 10%, well below the 16.5% expected by analysts, resulting in an 8% decline in shares, reflecting market concerns over its future growth potential.
- Novo Nordisk Price Reduction Strategy: Novo Nordisk announced it would cut monthly list prices for Wegovy and Ozempic by up to 50%, causing a 2% drop in shares, which may impact its market share and profit margins amid increasing competition.
- Vir Biotechnology Stock Surge: Vir Biotechnology's shares surged nearly 30% following positive Phase 1 results for its VIR-5500 treatment for metastatic prostate cancer, indicating strong potential for its research and an increase in market confidence.
See More
US Equity Benchmarks Post Largest One-Day Gains in Over Two Weeks
- Market Rebound: Major US equity benchmarks recorded their largest one-day gains in over two weeks on Tuesday, indicating a significant improvement in market sentiment likely driven by investor optimism regarding economic recovery.
- Increased Trading Volume: The rise in the stock market was accompanied by a notable increase in trading volume, suggesting heightened investor participation, which may signal a restoration of market confidence and potential for further gains ahead.
- Sector Performance Divergence: While the overall market rose, different sectors exhibited varied performances, with technology and consumer goods stocks leading the gains, reflecting investor preferences for specific industries and the diversity of market choices.
- Economic Data Impact: The market rebound may have been influenced by recent positive economic data, enhancing investor expectations for future economic growth, thereby driving stock prices higher and improving overall market sentiment.
See More
IBM Stock Plummets 13% Amid AI Disruption Fears
- Significant Stock Drop: IBM's stock fell over 13% on Monday, wiping out approximately $31 billion in market capitalization due to fears that AI technologies could disrupt its COBOL tech stack, although shares saw a modest recovery of 2.7% by afternoon.
- Threat from AI Tools: Anthropic's blog highlighted that AI tools could modernize COBOL-based systems, raising investor concerns about IBM's mainframe sales, which accounted for 23% of the company's total revenue last year.
- Slowing Revenue Growth: Despite IBM's revenue reaching $67.5 billion last year, an 8% annual increase, its sales and earnings growth are more moderate compared to other tech companies, with projected currency-adjusted revenue growth of about 5% this year.
- Cash Flow Projections: IBM anticipates free cash flow of approximately $15.7 billion for the year, reflecting a 7% annual increase, but uncertainties regarding the impact of AI technologies on its consulting and software businesses may lead investors to adopt a cautious outlook on future growth.
See More
IBM Shares Plummet Amid AI Product Concerns
- Significant Stock Drop: IBM shares plummeted on Monday, marking the largest decline in 26 years, primarily due to concerns over Anthropic's Claude Code product's ability to translate COBOL, raising fears about IBM's legacy business.
- Self-Disruption Capability: Despite the market's reaction, Jefferies analyst Brent Thill noted that IBM is already disrupting itself with the watsonx Code Assistant for Z, which uses generative AI to refactor COBOL into Java, modernizing applications effectively.
- Software Reacceleration: Thill emphasized that IBM's software reacceleration hinges not just on mainframes but on broader momentum across hybrid cloud, AI, automation, and data, showcasing the company's strategic positioning in these areas.
- Mainframe Business Growth: Contrary to negative market perceptions, Thill pointed out that IBM's mainframe business is growing, with 70% of clients expanding their workloads, and mainframes continue to handle approximately 73% of global transactional volumes, underscoring their critical role across industries.
See More
AI Expected to Trigger Productivity Boom and Economic Growth
- AI's Potential: Cathie Wood of ARK Invest forecasts that AI will trigger an explosive growth in productivity, accelerate real GDP growth, and lower inflation, indicating a strong optimism about the future economy.
- Market Reaction: Investor sentiment has fluctuated due to concerns over potential economic disruptions from AI, leading to a selloff in cybersecurity stocks, which highlights the market's sensitivity to new technologies.
- COBOL Modernization: Anthropic announced Claude Code's COBOL capabilities, which are expected to reduce the modernization timeline from years to quarters, causing IBM's shares to tumble over 13%, reflecting the market's rapid response to technological changes.
- Unemployment Rate Forecast: Citrini Research predicts that unemployment rates could rise to 10.2% within the next two years and forecasts a 38% decline in the S&P 500 by 2028, which would have significant implications for the consumer economy.
See More
Market Rebound: Impact of AI and Tariff Policies
- Market Recovery: Tuesday's session marked a partial recovery from Monday's broad sell-off, with the S&P 500 rising 0.8%, the Dow Jones up 0.93%, and the Nasdaq Composite increasing by 1.1%, indicating a restoration of investor sentiment and market stability.
- AI Influence: Anthropic's event proved less threatening than anticipated, positioning Claude as an orchestration layer that integrates with existing tools like DocuSign and Salesforce, leading to a 4% rise in their shares, reflecting a positive market response to collaboration and integration.
- Tariff Policy Uncertainty: Trump's increase of the global tariff rate to 15% and the Supreme Court's ruling against emergency powers tariffs have created investor uncertainty regarding future effective tariff rates, putting pressure on growth stocks and high-risk investments while increasing market volatility.
- Long-Term Trend Intact: Despite current market fluctuations, all three major indexes are up over 13% in the past 52 weeks and are within 3% of their end-of-2025 levels, indicating that the long-term upward trend remains intact, with investors needing to watch Nvidia's upcoming earnings report for potential market impacts.
See More
Analysis of Stock Price Movements for Multiple Companies
- Dillard's Revenue Decline: Dillard's reported fourth-quarter revenue of $1.99 billion, falling short of the $2.03 billion expected by analysts, leading to a 7% drop in shares, primarily due to winter storms impacting over a third of its stores, highlighting the significant effect of seasonal weather on retail performance.
- Planet Fitness Weak Guidance: Planet Fitness anticipates full-year adjusted earnings per share growth of only 9% to 10%, well below the 16.5% expected by analysts, resulting in an 8% decline in shares, reflecting market concerns over its future growth potential.
- Novo Nordisk Price Reduction Strategy: Novo Nordisk announced it would cut monthly list prices for Wegovy and Ozempic by up to 50%, causing a 2% drop in shares, which may impact its market share and profit margins amid increasing competition.
- Vir Biotechnology Stock Surge: Vir Biotechnology's shares surged nearly 30% following positive Phase 1 results for its VIR-5500 treatment for metastatic prostate cancer, indicating strong potential for its research and an increase in market confidence.
See More
