This "will rattle many": IBM stock tanks as AI budgets shift

IBM’s stock reaction reflects concerns that shifts in corporate AI spending are pressuring traditional software and infrastructure revenue. In preliminary second-quarter commentary, CEO Arvind Krishna said IBM had “faltered” in adapting to a spending change toward AI tokens and data centers. He cited a “capex reprioritization” magnitude IBM did not anticipate and said clients were also “distracted” by cybersecurity needs tied to emergent AI threats. Krishna said rising chip costs left less room for IBM’s core business of mainframes and software, and that in late June customers redirected quarterly capex toward servers, storage, and memory to secure supply-constrained infrastructure. IBM expected software revenue to rise 5% versus Wall Street’s 10%, while infrastructure revenue was expected to fall 7% versus a 3% decline. Analysts also noted AI usage caps and movement to lower-cost models. IBM is pursuing new revenue areas, including partnering with the U.S. Department of Commerce on Anderon, matching $1 billion in federal funding, and aiming for a fault-tolerant quantum computer by 2029.