AI Investment Frenzy Reshapes Customer Spending Patterns, IBM Stock Plunges 25%

U.S. tech giant International Business Machines Corporation (IBM) saw its stock price plunge 25% today after releasing a disappointing preliminary financial report for the second quarter. IBM attributed this to customers adjusting their spending due to expectations of rising prices for memory chips and other AI-related infrastructure.

According to Agence France-Presse, IBM CEO Arvind Krishna said in a letter to shareholders: "We were not fast enough in our adaptation and actions." IBM reported that revenue grew just 1% to $17.2 billion for the three months ended in June.

A global rush by technology companies to build artificial intelligence (AI) infrastructure has driven up demand for servers, memory chips, and storage systems, leading to price increases and industry-wide supply shortages.

IBM said that as the end of June approached, many large enterprise customers rushed to purchase hardware ahead of expected price hikes.

This buying surge caused customers to reduce spending on IBM's high-margin mainframes and related software. Banks and large enterprises use these powerful systems to process millions of transactions.

Revenue from IBM's infrastructure business fell 7%, including its flagship mainframe product line. Software business revenue rose 5%, but still fell short of market expectations.

IBM also said that security concerns in the tech industry distracted customers this quarter. These concerns were triggered by Anthropic's release of the Mythos AI model, which can identify network vulnerabilities exploitable by hackers, raising widespread alarm.

As a result, companies focused on strengthening their cyber defenses rather than investing in previously planned projects. This news drove cybersecurity company stocks higher, with CrowdStrike's shares surging 12% and Okta and Netskope rising about 11% each.

IBM's stock plunge will fuel broader discussions about the consequences of the AI revolution for traditional software companies, known as Software as a Service (SaaS) firms, including IBM, Salesforce, Adobe, and Intuit.

After IBM's warning, shares of these companies fell today.

Earlier this year, analysts predicted a bleak outlook for the software industry as AI models enable average users to perform similar tasks, briefly sending Wall Street into a panic dubbed the "SaaS-pocalypse."

On a positive note, IBM's Red Hat division, which sells open-source software, saw revenue grow 11%. Due to customer purchases, IBM's server and storage business outside of mainframes grew 37%.

IBM also announced the Lightwell initiative, a $5 billion program to fix open-source software vulnerabilities, supported by major banks including Bank of America, JPMorgan Chase, and Goldman Sachs. (Translated by Zhang Xiaowen) 1150715