IBM Faces Major Crisis: 95% of COBOL ATMs at Risk from Cost-Efficient AI Disruption

A 70-year-old programming language runs nearly every ATM in America. On Monday, investors decided that's now a problem for IBM.

IBM shares crashed 13.2% after AI startup Anthropic said its Claude Code tool could speed up modernisation of COBOL systems. The stock closed at $223.35 (£165.21),wiping roughly $31 billion (£22.9 billion) off the company's market value. It marked IBM's worst single-day drop since October 2000.

The Code Behind Your Cash

COBOL, short for Common Business-Oriented Language, dates back to the late 1950s. It still powers critical systems across banking, airlines, and government agencies. About 95% of ATM transactions in the United States run on it.

'Hundreds of billions of lines of COBOL run in production every day, powering critical systems in finance, airlines, and government,' Anthropic wrote in a blog post. 'Despite that, the number of people who understand it shrinks every year.'

Here's the catch. The programmers who built these systems have mostly retired. Few universities teach COBOL. That talent shortage made updates expensive. Companies needed large teams of consultants spending years just to map out how the code worked before they could change anything.

IBM sold the mainframes that ran these programs. The challenge of leaving was significant because it meant giving up steady, recurring revenue.

What Changed

Anthropic claims Claude Code can do what those consultant teams did, but faster and cheaper. The tool maps dependencies across thousands of lines of code, documents workflows, and spots risks that would take human analysts months to find.

'Legacy code modernisation stalled for years because understanding legacy code cost more than rewriting it,' Anthropic stated. 'AI flips that equation.'

Investors reacted fast. IBM's February decline now sits at 27%. According to Bloomberg data, that puts the company on track for its worst month since at least 1968.

IBM Pushes Back

IBM didn't stay quiet. Software Chief Rob Thomas said translating code isn't the same as full system modernisation. The company argued its mainframe platform offers performance and security benefits that go beyond any single programming language.

CEO Arvind Krishna had previously said IBM's own watsonx Code Assistant for Z achieved 'very wide adoption' among customers looking to understand their COBOL codebases. And the numbers back up some confidence. IBM's z17 mainframe posted its highest quarterly revenue in over two decades last quarter, up 61% year-over-year.

Evercore ISI analysts noted that 'clients already had the option to migrate from the mainframe, yet they are sticking with the platform.' Some 45 of the world's top 50 banks still run on IBM mainframes. So do four in five major airlines.

The Ripple Effect

The sell-off spread. Accenture and Cognizant Technology Solutions both dropped roughly 6% as investors reassessed their exposure to legacy system modernisation. Major US stocks fell sharply, with the Dow Jones index dropping more than 820 points during Monday's session.

For everyday people, the shakeup carries mixed signals. Banks facing cheaper modernisation paths might eventually improve digital services. But rushed migrations away from battle-tested systems could introduce new vulnerabilities in the infrastructure handling your money.

What Comes Next

Whether Anthropic's announcement marks a real turning point or just another case of market overreaction remains unclear. IBM has weathered disruption before. It also has its own AI tools in the fight.

But Monday showed one thing clearly. That ancient code running your local ATM? It just became the centre of a $31 billion (£22.9 billion) question.