Damnang
Semiconductor Engineer in Silicon Valley, AI Chip Investment Research
IBM is extremely expensive, and its latest announcement adds caution: enterprises are prioritizing hardware and memory purchases, which pressures software spending. Quantum computing is a distant option, software is too small a part of the business to drive upside, and the stock carries a significant Trump premium. The same shift supports even stronger conviction in semiconductors and memory. x.comÂ
IBM is a valuation trap, with a high-conviction sell target of $200 by December 2026 as its multiple compresses toward its historical average. It lags in AI and quantum, its premium P/E lacks the structural growth to justify it, and its CY26 EPS estimate of $12.35 is under threat. A macro slowdown could push enterprises to cut nice-to-have transformation projects, and missing hyped quantum milestones would speed a rerating as Google and Microsoft pull ahead. x.com x.comÂ
IBM trades at an AI premium with no real AI growth behind it. The company forecast only 1% growth yet more than doubled from $150 to over $320 on AI hype, while its AI business is effectively non-existent. Its Q2 earnings warning came from consulting and infrastructure, not software, and the stock has fallen back to its May level around $220. x.com x.com x.comÂ
IBM should re-rate over the medium to long term on two fronts: quantum computing, where the U.S. government is taking a stake, and a broader software re-rating as software is no longer seen purely as an AI loser. IBM also has a strong customer base and channels, with deep customer stickiness. x.comÂ
IBM remains bearish on trend heading into earnings, which will be a damage report rather than a preview. It already pre-warned on July 15 with preliminary results well below estimates, BofA cut its target to $280, and the stock is down about 34%. Because much of the bad news is already out, a bounce is possible if it resets the bar and stops the bleeding. x.comÂ
IBM is not worth buying unless it reinvents itself. It has some dominant businesses, but since the financial crisis it has relied on financial engineering rather than real innovation. Even buying at the Covid low or the 2022 low produced a poor return, cushioned only by a roughly 5% dividend. x.com x.com x.comÂ
IBM, the quantum computing leader, is a buy after President Trump fast-tracked quantum computing with multiple executive orders, making the next three years especially interesting for the company. x.comÂ
IBM is one of the strangest and most expensive companies today because its re-rating rests on a software transition its numbers don't show. Bulls say IBM is becoming a software company, yet deferred revenue was lower as a share of total assets in FY25 than in FY16. x.comÂ
IBM is not a growth stock but a mature business held mostly for dividends, so it does not suit investors still in accumulation mode, as most on X are. x.comÂ
IBM has a quantum catalyst in a $10B five-year commitment and a big US government deal, plus AI and hybrid cloud tailwinds as watsonx and generative AI bookings run strong and enterprise automation accelerates. The stock is almost above its 200-day moving average with momentum increasing. Analysts have issued multiple buy upgrades, including DZ Bank at $295, with targets of $280-$340+, 12-30% above roughly $255, and earnings estimates are rising. x.comÂ
Software stocks face customers shifting budgets to AI infrastructure and cybersecurity while vendors spend more on tokens than planned. IBM said this last week and fell almost 30% in one day, and Pegasystems said the same this morning. That is good reason to be nervous holding ServiceNow into tonight's earnings, though it could surprise to the upside if it avoids the issue. Palantir is the only software name worth owning right now. x.comÂ
