IBM’s stock suffered its worst trading day since 1968 on July 14, 2026, with shares sinking as much as 27 percent in intraday trading after the company admitted it had “faltered” in adapting to the tech industry’s spending shift toward artificial intelligence infrastructure. The single-day drop was the largest for IBM since at least January 3, 1968, according to Bloomberg data.
CEO Arvind Krishna said the company “did not anticipate the magnitude of the capex reprioritization” happening across the tech industry, as clients shifted spending toward the computer chips and data centers powering the AI sector. “These conditions require our teams to execute perfectly, and this quarter we faltered,” Krishna said in a letter to investors. “We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.”
IBM said it expects second-quarter revenue to increase just 1 percent to $17.2 billion — well below analyst estimates and the slowest growth rate in more than a year. The company projected quarterly adjusted earnings per share of $2.93, lower than the market estimate of $3.02. IBM has been trying to reduce its reliance on the cyclical mainframe business by focusing on its software unit, including its high-margin Red Hat business, which helps firms run applications across different cloud providers.
Krishna added that IBM’s customers were “distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter” — an apparent reference to the release of new AI models, such as Anthropic’s Claude Mythos, which demonstrated unprecedented abilities to identify and exploit software flaws. These AI models have jolted businesses this year with their ability to expose vulnerabilities in existing software and encryption systems, pushing companies to ramp up cybersecurity spending at the expense of other technology investments.
The warning from IBM fueled anxiety across Wall Street, where investors have grown concerned that powerful AI models will render traditional software offerings obsolete. Business software firms like ServiceNow and Workday each saw shares plunge following IBM’s letter. Chris Beauchamp, chief market analyst at IG Group, called it “an ugly moment for IBM and software stocks,” adding: “The big question will be how long the shift to infrastructure and cybersecurity lasts. A few more months might be bearable, but more than that and serious questions will be asked all over again about software stocks.”
Krishna tried to reassure investors by pointing to IBM’s own investments in new technology, including AI-powered cybersecurity and quantum computing. “Our job is to help our clients through uncertainty, to find paths forward to grow their businesses no matter what is happening in the external environment,” he said.
The sharp decline reflects a broader realignment in the technology sector, where spending is rapidly shifting from traditional enterprise software toward AI infrastructure — the chips, data centers, and specialized systems that power large language models. Major tech companies including Meta and Microsoft have invested tens of billions in data center capacity this year, creating a divide between firms that build AI infrastructure and those whose legacy products are being deprioritized as customers redirect budgets.
For New York’s tech sector, IBM’s stumble serves as a stark reminder that the AI revolution creates both winners and losers. While Wall Street banks reap record profits from AI-driven dealmaking, companies whose business models are disrupted by AI face significant challenges in adapting quickly enough to maintain investor confidence.
Sources: New York Post, Bloomberg
