{"slug": "ugly-moment-for-software-stocks-as-ibm-suffers-biggest-one-day-slump-in-decades", "title": "‘Ugly moment’ for software stocks as IBM suffers biggest one-day slump in decades", "summary": "IBM shares plunged more than 20% in their worst single-day drop since the 1987 market crash after the company warned that customers are diverting spending from software to AI infrastructure, wiping over $50 billion from its market value. The warning dragged the Dow Jones lower and raised concerns that the AI spending boom is hurting parts of the software sector, as IBM CEO Arvind Krishna admitted the company failed to react quickly enough to the shift in client budgets toward servers, storage, and memory for AI systems.", "body_md": "# ‘Ugly moment’ for software stocks as IBM suffers biggest one-day slump in decades\n\nIBM shares are poised to suffer one of their worst-ever trading days after the tech giant warned customers were diverting spending away from software and into AI infrastructure.\n\nThe warning wiped more than $50bn (£37bn) from IBM’s market value, sending the stock down more than 20 per cent and putting it on course for its biggest selloff since the 1987 market crash.\n\nThe stock slide dragged the Dow Jones lower as investors questioned whether the AI spending boom was beginning to hurt parts of the software sector.\n\n“This is an ugly moment for IBM and software stocks,” said Chris Beauchamp, chief market analyst at IG.\n\n“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.”\n\nIBM said it expects second-quarter revenue of $17.2bn and adjusted earnings of $2.93 a share, both below Wall Street forecasts.\n\nChief executive Arvind Krishna admitted the company had failed to react quickly enough after customers unexpectedly redirected budgets towards servers, storage and memory needed to power artificial intelligence systems.\n\n“These conditions require our teams to execute perfectly, and this quarter we faltered,” Krishna wrote in a letter to investors.\n\n“In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage and memory purchases.”\n\nKrishna said the company had expected some disruption from supply chain pressures but “did not anticipate the magnitude” of the shift.\n\nHe added that several large software deals slipped beyond the quarter after businesses reprioritised spending.\n\n## AI investment shifts to hardware\n\nWhile chipmakers and memory manufacturers such as Micron and SK Hynix have benefited from surging demand for AI hardware, software companies face questions over whether customers are delaying spending to fund the underlying infrastructure.\n\nDavid Morrison, senior market analyst at Trade Nation, said: “IBM suddenly lurched lower this afternoon, taking the Dow down with it, after ‘Big Blue’ issued a profits warning.”\n\nThe company’s update also surprised investors because IBM rarely issues preliminary results ahead of scheduled earnings. Its full quarterly figures had been due next week.\n\n“The headline figures do not explain a reaction this extreme for a company of this size”, said analysts at XTB. “The key to understanding the market’s reaction lies in the CEO’s comments about capex.”\n\nThey added that if IBM was experiencing meaningful pressure from customers prioritising memory and AI infrastructure spending, investors were likely to assume rivals faced similar challenges.\n\nThe sell-off comes after months of strong gains for IBM shares, driven by optimism over its AI and quantum computing businesses. Before Tuesday’s collapse, the stock had climbed from around $215 in May to almost $300.\n\nIt also follows pressures on IBM earlier this year after [Anthropic launched new AI tools ](https://www.cityam.com/anthropics-new-ai-legal-tool-wipes-billions-off-european-data-stocks/)capable of modernising legacy software, which trtiggered investor concerns about the long-term outlook for one of IBM’s historic businesses.\n\nAnalysts at Jefferies, however, argued at the time that IBM’s future growth depended far more on AI software, cloud computing and automation than its legacy mainframe operations.", "url": "https://wpnews.pro/news/ugly-moment-for-software-stocks-as-ibm-suffers-biggest-one-day-slump-in-decades", "canonical_source": "https://www.cityam.com/ugly-moment-for-software-stocks-as-ibm-suffers-biggest-one-day-slump-in-decades/", "published_at": "2026-07-14 14:27:39+00:00", "updated_at": "2026-07-14 14:48:49.761698+00:00", "lang": "en", "topics": ["artificial-intelligence", "ai-infrastructure", "ai-chips", "ai-startups", "ai-policy"], "entities": ["IBM", "Arvind Krishna", "Chris Beauchamp", "IG", "Micron", "SK Hynix", "David Morrison", "Trade Nation"], "alternates": {"html": "https://wpnews.pro/news/ugly-moment-for-software-stocks-as-ibm-suffers-biggest-one-day-slump-in-decades", "markdown": "https://wpnews.pro/news/ugly-moment-for-software-stocks-as-ibm-suffers-biggest-one-day-slump-in-decades.md", "text": "https://wpnews.pro/news/ugly-moment-for-software-stocks-as-ibm-suffers-biggest-one-day-slump-in-decades.txt", "jsonld": "https://wpnews.pro/news/ugly-moment-for-software-stocks-as-ibm-suffers-biggest-one-day-slump-in-decades.jsonld"}}