$100 billion wiped out: How AI hardware boom just crushed IBM
&imwidth=600&imheight=450&format=webp&quality=medium "$100 billion wiped out: How AI hardware boom just crushed IBM")
IBM CEO Arvind Krishna Photograph: (AFP)
IBM’s $100B crash (its worst since 1968) signals a massive shift: enterprise budgets are rotating out of software and into AI hardware as a severe global chip shortage starves tech incumbents.
On June 2nd, IBM (International Business Machines) was riding high, up 13 per cent for the year, trading at record levels. It looked like proof that legacy tech could still win in the AI race. But 42 days later, that story collapsed.
IBM shares crashed 25 per cent on Tuesday to mark the steepest single-day plunge since the stock started trading in 1968.
The stock is now down roughly 35 per cent from its June peak and over $100 billion in market value, gone. The trigger: a preliminary earnings warning, released eight days ahead of schedule.
IBM projected adjusted earnings of $2.93 per share against Wall Street's $3.01 estimate, on revenue of $17.2 billion versus expectations of $17.86 billion. Small miss on paper, but a massive market reaction.
The real story is what's underneath.
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CEO Arvind Krishna admitted, "This quarter we faltered", pointing to a global memory chip shortage that has pushed clients to redirect spending towards servers, storage and memory instead of software and mainframes.
Memory giants Samsung, SK Hynix and Micron have redirected production towards AI data centre chips, leaving 2026 capacity effectively sold out, and Micron's CEO expects tight conditions through 2027.
This isn't isolated. IBM's slide rattled the wider software sector, Salesforce fell 4 per cent, Microsoft nearly 3 per cent, and the IGV software ETF dropped 2 per cent. Meanwhile, Micron rose, and storage firm SanDisk jumped nearly 6 per cent.
That shows capital rotating from software into hardware in real time. So, AI's infrastructure buildout is now powerful enough to reshape enterprise budgets overnight, rewarding chipmakers while punishing software incumbents who assumed steady demand.
IBM's July 22nd earnings call will show whether this is a temporary supply squeeze or the first crack in software's AI-era business model.
Watch | IBM shares plunge 25% after shock earnings warning, ai chip shortage hits software demand
