IBM Plunges 24% on Worst Day Ever as AI Disrupts Sales
IBM lost $67 billion in market value after CEO Arvind Krishna admitted the company failed to adapt quickly enough as clients diverted spending from software to AI hardware.
IBM shares suffered a record 24% drop on Tuesday, marking the steepest single-day decline in the company’s 115-year history. The selloff wiped approximately $67 billion from the firm’s market capitalization, leaving it valued at just under $205 billion. The plunge followed a candid letter to investors from CEO Arvind Krishna detailing a "disappointing" second quarter.
Krishna conceded that IBM’s execution faltered when market conditions shifted unexpectedly. The company had anticipated only a low-single-digit decline in infrastructure revenue for the year, buoyed by the strong launch of its z17 mainframe. Instead, IBM experienced a severe shortfall in its Z performance and related transaction processing software, causing several large contracts to miss their expected closing timelines.
The primary culprit behind the missed targets was a sudden reallocation of corporate technology budgets. As demand from AI data centers constrained the supply of servers, storage, and memory, clients rushed to secure available hardware ahead of expected price increases. IBM anticipated some supply chain disruption, but Krishna admitted the company did not foresee the sheer magnitude of customers shifting capital expenditure away from software purchases.
Client spending was further disrupted by the release of Anthropic’s new AI model, Mythos. Krishna noted that this release stalled several major IBM deals as customers paused to evaluate cybersecurity implications. Anthropic has claimed Mythos could enable hackers to identify system vulnerabilities before companies can detect them.
IBM is scheduled to report official second-quarter earnings on July 22. Wall Street analysts polled by FactSet currently project revenue of $17.2 billion and earnings per share of $2.93, representing modest annual growth of 1.3% and 3.5%, respectively. The dramatic selloff underscores growing investor anxiety that the rapid buildout of AI infrastructure is actively cannibalizing legacy software spending.
This is not the first time AI developments have punished IBM’s stock. In February, shares suffered their worst drop since 2000 after Anthropic released an AI tool designed to streamline updates for COBOL, a decades-old programming language heavily associated with IBM systems. The broader global software sector has faced similar pressure amid fears that advancing AI capabilities will automate tasks currently provided by established technology firms.
