IBM Tanks 23% After AI Spending Shift: Will Indian IT Stocks Follow Suit?

The AI boom has just claimed another victim. IBM shares plunged as much as 23% in pre-market trading after releasing weaker-than-expected preliminary quarter results, with the company saying customers diverted their technology budgets from software to AI infrastructure. The sharp fall wiped out nearly $55 billion in market value and also dragged down several global software stocks including Oracle, Adobe, Accenture and Cognizant in the pre-market session. Not just that, IBM's fall also dragged down the American depository receipts of Indian IT companies, including Infosys and Wipro, signalling that Indian IT stocks could also come under pressure when markets open tomorrow. So, here's what exactly happened. IBM reported preliminary second-quarter revenue of $17.2 billion That was below analysts' expectations of $17.86 billion in revenue and earnings of around $3.01 per share. The numbers disappointed investors, putting the company on track for one of its biggest single-day declines in decades if those losses hold. According to IBM CEO Arvind Krishna, the biggest reason was an unexpected shift in customer spending. Instead of buying software and infrastructure products from IBM, many clients redirected their technology budgets towards AI-related hardware including servers, storage systems and memory chips. In a letter to investors, CEO Krishna said IBM had expected some impact from supply chain challenges but it did not anticipate the scale of this shift in capital spending. He added that several large deals that IBM had expected to close during the quarter were delayed, contributing significantly to the earnings miss. However, IBM said it is still reviewing its financial statements and the final quarterly results could differ slightly from these preliminary numbers.