IBM Stock Crash Wipes Out $65 Billion in a Day, Worst Since 1987 as AI Rewires Tech Spending

IBM shares collapsed 25.2% on Tuesday, wiping out more than $65 billion (£48.5 billion) in market value in the technology giant's worst trading day on record, after customers pulled spending from software and mainframes to buy AI hardware first.

The stock closed at $217.07 (£162), sinking further than the 23.7% plunge it suffered on Black Monday in October 1987, its previous worst day since records began in 1968. The rout followed IBM's rare decision to pre-announce second quarter results that fell well short of Wall Street forecasts.

Preliminary revenue came in at $17.2 billion (£12.8 billion), roughly $660 million (£492 million) below the $17.86 billion analysts expected. Adjusted earnings of $2.93 (£2.19) per share also missed forecasts. Infrastructure revenue dropped 7% as z17 mainframe sales wound down faster than planned, while software grew 5% and consulting stayed flat.

Where the Money Actually Went

Chief executive Arvind Krishna said customers did not stop spending. They redirected it. 'In the last few weeks of June, we saw clients shift their quarterly [capital expenditure] spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases,' he wrote in a letter to investors.

Krishna admitted IBM misjudged the scale of the shift, saying the company 'did not anticipate the magnitude of the capex reprioritization'. Several large deals also failed to close on schedule, and Krishna conceded that 'this quarter we faltered'.

The AI Gold Rush Claims a Blue Chip

The squeeze stems from the global memory shortage created by AI data centres, the same crunch already pushing up laptop and smartphone prices for consumers. Micron Technology's data centre revenue surged 653% year-on-year to $11.52 billion (£8.62 billion) last quarter, and memory stocks rallied on Tuesday even as IBM cratered.

For the past year, the AI boom lifted nearly every corner of tech. Tuesday offered the first hard evidence that hardware and software are now competing for the same corporate budgets. The 115-year-old company is the first legacy giant to see that competition visibly gut its core business, and its peers are hurting too. Oracle shares have fallen 33% this year, Microsoft has lost 20%, and Accenture has dropped 50%.

Why Your Retirement Account Felt It

The warning spread fast. Salesforce, ServiceNow, and Microsoft each fell between 3% and 5% in early trading before partially recovering, dragging on anyone holding an S&P 500 index fund or a 401(k) weighted toward software names. HSBC analysts downgraded IBM from 'hold' to 'reduce' and cut their price target from $231 (£172.89) to $191 (£142.95).

Ashish Nadkarni of research firm International Data Corporation said in a note that Wall Street's reaction was likely stronger than warranted, though investors shouldn't dismiss the warning. IBM, he wrote, 'is not isolated from the strategic reallocation of enterprise budgets'.

What Happens on 22 July

Cybersecurity is adding to the freeze. Krishna told recently that recent advances in AI hacking capabilities have customers pausing new software deals while they work out how much to spend on protection, though he said IBM does not see its software 'being disrupted by AI at all'.

Full results arrive on 22 July, when Krishna must convince investors the collapse was a timing problem rather than proof that the AI boom has stopped lifting the whole tech sector and started deciding which companies win and which pay for it.