IBM Stock Slides Amid Concerns Over AI Impact
IBM’s share price tumbled by over 10% at the opening of the market on Thursday, amid a broader sell-off affecting various software firms, including ServiceNow and Oracle. This downturn comes as investor worries about the influence of artificial intelligence (AI) persist.
The recent first-quarter results did little to alleviate investor concerns, even though IBM reported better-than-expected growth in its software sales. However, revenue from its consulting segment fell short of projections. Despite this, the company has reaffirmed its guidance for constant currency revenue growth exceeding 5% for the full year, slightly below the anticipated 5.1%. Analysts may perceive this tempered outlook as cautious, especially in light of IBM’s recent acquisition of Confluent, which was anticipated to provide additional revenue streams.
The tech market is witnessing a significant sell-off in software stocks driven by fears that AI advancements could disrupt established business models and render existing software products redundant. Earlier in February, IBM faced a staggering drop of over 20% in its stock price—the most significant monthly decline the company has seen in decades—following the announcement by AI developer Anthropic of a new tool designed to modernise a programming language used on IBM mainframes.
In opposition to this narrative suggesting that AI could undermine its business, IBM has argued that AI innovations will enhance the attractiveness of its offerings. "As clients scale use cases, AI continues to be a tailwind for our global business," stated IBM CEO Arvind Krishna in the company’s earnings announcement.
IBM, renowned historically for its mainframe computers, has engaged in a series of acquisitions in recent years, strategically positioning itself as a leader in hybrid cloud software. This shift has included major deals, such as acquiring Red Hat in 2019 and HashiCorp last year, with Confluent being the latest addition to its portfolio.
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Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X @ines_ferre.
