IBM warns AI boom squeezing software budgets, shares sink

STORY: :: Archive IBM shares plunged 25% on Tuesday after it signaled the AI infrastructure boom is drawing spending away from the software sector. Big Blue said it expected revenue to rise just 1% in the second quarter, falling short of Wall Street hopes. In a letter to investors, CEO Arvind Krishna said the firm had "faltered" in keeping pace with a shift in corporate spending from software to data-center infrastructure. He said that clients shifted their expenditure "toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases." Krishna added that "numerous large deals" had failed to close as expected. IBM sells enterprise software and IT consulting services to big business and governments. It noted that companies were also prioritizing cybersecurity spending given recent breakthroughs in AI hacking abilities. Tuesday's announcement adds to concerns over a software industry already rocked by the rise of AI tools. Software stocks Microsoft, ServiceNow, Salesforce and Intuit all fell between 1.5% and 5%.

STORY: :: Archive IBM shares plunged 25% on Tuesday after it signaled the AI infrastructure boom is drawing spending away from the software sector. Big Blue said it expected revenue to rise just 1% in the second quarter, falling short of Wall Street hopes. In a letter to investors, CEO Arvind Krishna said the firm had "faltered" in keeping pace with a shift in corporate spending from software to data-center infrastructure.

He said that clients shifted their expenditure "toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. "Krishna added that "numerous large deals" had failed to close as expected. IBM sells enterprise software and IT consulting services to big business and governments.

It noted that companies were also prioritizing cybersecurity spending given recent breakthroughs in AI hacking abilities. Tuesday's announcement adds to concerns over a software industry already rocked by the rise of AI tools. Software stocks Microsoft, ServiceNow, Salesforce and Intuit all fell between 1.5% and 5%.