IBM Plunges 13% After AI Startup Targets Its Oldest Stronghold

International Business Machines Corp. suffered a painful market setback this week, with shares recording their steepest single-day decline in more than two decades after an artificial intelligence startup promoted a tool aimed at one of IBM’s oldest strengths.

The tech giant’s stock dropped 13% in one trading session, marking its worst percentage fall since October 2000. The selloff deepened an already difficult month for the company, with shares sliding 27% in February. That puts IBM on track for its largest monthly decline since at least 1968, according to data compiled by Bloomberg.

IBM posts its steepest fall since 2000

The sudden downturn rattled investors who have long viewed IBM as a steady force in enterprise technology. The company, formally known as International Business Machines Corp., has spent years repositioning itself around hybrid cloud services, consulting and artificial intelligence. However, the latest drop underscores how quickly sentiment can shift in an AI-driven market.

A 13% decline in a single session is rare for a company of IBM’s size and history. The move erased billions in market value and signaled heightened concern about competitive pressures in legacy systems, particularly those tied to mainframe computing.

The magnitude of the drop was especially notable given IBM’s reputation for resilience. While the broader technology sector has experienced volatility in recent years, IBM had largely avoided dramatic swings of this scale until now.

Anthropic highlights a Cobol-focused AI tool

The catalyst for the selloff came after AI startup Anthropic PBC drew attention to its Claude Code tool, which it says can help modernize Cobol, a programming language that dates back decades and still powers critical systems worldwide.

Cobol remains deeply embedded in industries such as banking, insurance and government. Many of these systems run on IBM mainframes, making the language central to the company’s longstanding enterprise relationships.

Anthropic’s promotion of a tool designed to simplify or accelerate Cobol modernization appeared to raise questions among investors about IBM’s competitive edge in that space. If outside AI companies can offer effective modernization solutions, it could chip away at IBM’s influence over a segment of the market it has historically dominated.

The announcement fueled speculation that generative AI tools may rapidly transform legacy codebases, potentially reducing reliance on traditional vendors.

February becomes one of IBM’s worst months in decades

Beyond the single-day plunge, February has proven especially difficult for IBM shareholders. With shares down 27% this month, the company is on pace for its most severe monthly slide in more than half a century.

Market watchers noted that such a decline is unusual for a mature technology firm with a diversified business model. IBM has spent recent years emphasizing artificial intelligence capabilities, including enterprise AI offerings and consulting services built around data modernization.

Still, the sharp downturn reflects broader investor sensitivity to AI competition. As startups and established tech firms race to release new AI tools, markets have reacted swiftly to developments that suggest disruption in traditional revenue streams.

For IBM, whose identity is intertwined with enterprise computing infrastructure, any perceived threat to its role in legacy systems can carry outsized impact.

The company has not publicly detailed how Anthropic’s tool might affect its business, and investors will likely look for clarity in future earnings updates and strategic commentary.

IBM’s share decline and the surrounding market reaction were first reported by Bloomberg.

Source: Bloomberg