IBM had its worst single trading day since 1968, and the reason is that companies are spending all their money on AI hardware instead

[TommyB_20]

IBM's stock dropped 25% on July 14, the worst single day for the stock since records began in 1968, worse even than its previous record drop during Black Monday in October 1987, wiping the company's total value down to just under $200 billion by the end of that week. IBM had earned $2.93 per share on $17.2 billion in revenue, missing Wall Street's expectation of $3.01 per share and $17.86 billion. CEO Arvind Krishna explained in a letter to investors that companies redirected spending toward servers, storage and memory chips instead of IBM's usual products, rushing to buy AI hardware before prices rise further, with several large deals also failing to close in time. Krishna added that Anthropic's Mythos AI model is prompting some companies to pause cybersecurity spending while they figure out what they actually need, which is holding up some IBM deals too, though he maintained we don't see our software being disrupted by AI at all

This is not IBM's first AI related scare this year. Back in February, Anthropic released a tool that automatically rewrites old COBOL code, and investors worried it would hurt IBM's legacy software business, triggering the stock's worst day in 25 years at that time. Krishna said investors were overreacting then, and by June the stock had recovered to new highs, proving him broadly right. The bull case for IBM this time around notes the prior quarter was genuinely strong, with software sales up 11% to $7.05 billion, and options market pricing suggests traders see this as a stock that could swing sharply in either direction rather than one that's already been written off entirely

The bear case is that this problem extends well beyond IBM specifically. Salesforce and ServiceNow, both similarly viewed as AI outsiders, have each lost roughly a third of their value this year, with Workday and SAP expected to face similar pressure soon, while chip stocks are up 62% and cybersecurity stocks up 46% over the same period. Strategist Brian Mulberry summarized it bluntly, companies still want what IBM sells, they just don't have enough money left after spending it all on AI first. IBM is also betting on quantum computing as a longer term growth story, working with the US Commerce Department on a dedicated chip factory and targeting its first large scale working quantum computer by 2029, though some experts believe that technology remains a decade or more away from being commercially profitable, a long runway for a stock that just lost a quarter of its value in a single day

International Business Machines Corporation (IBM) Survived One AI Scare in February. This One Might Be Different.uk.finance.yahoo.com

[Demi-Q]

Companies still want what IBM sells, they just don't have enough money left after spending it all on AI first is such a clean way to summarize this whole dynamic across the entire software industry right now

[Cantona]

Krishna already having won this exact argument with investors once in February gives him real credibility going into this round, but a 25% single day drop is a much bigger vote of no confidence than the COBOL scare was

[QuantumOracle45]

The pattern across Salesforce, ServiceNow and soon Workday and SAP shows this isn't an IBM specific problem, it's every software company positioned as an AI outsider getting squeezed by the same capex reallocation

[WaveFunction30]

IBM's quantum computing bet being a decade away from profitability according to some experts, while Krishna targets 2029, is a long, uncertain runway to justify to investors who just watched the stock crater in a single session

[Joel5]

The Mythos related cybersecurity spending pause is an interesting side detail, shows how uncertainty about a completely different company's AI product can ripple into unrelated deals elsewhere in the industry

[Dylan54]

Software stocks being cheap by historical standards while chip and cybersecurity stocks sit at record highs is such a stark illustration of exactly where investor money is actually flowing right now

[Solo Elizabeth]

Is now the time to buy BIG as its a quantum leader!!!

[Beta]

This is a good example of a stock story that's really a proxy for the entire enterprise software industry's exposure to the AI capex boom rather than being about one company's specific execution failures

[Shane]

59 hedge funds holding IBM versus 282 holding Microsoft in the same period is a real signal about how much less conviction big investors have in IBM even before this latest crash happened

[RightNutter82]

Whether Krishna can actually answer what the next six months look like when he reports full results feels like the real test here, not answering that question convincingly would turn this into a much bigger structural problem than a one time bad quarter