TLDRs:
- IBM shares fall 13% as AI tool threatens legacy software revenue.
- Investors worry automation could cut billable hours for IBM and peers.
- Accenture and Cognizant also dip amid market fears of AI disruption.
- IBM maintains strong AI growth story despite immediate market jitters.
IBM (NYSE: IBM) saw its stock drop roughly 13% to $223.35 in late Monday trading following the announcement of Anthropic’s new AI tool for COBOL modernization.
Earlier in the day, the stock traded between $255.77 and $221.00, with around 19.5 million shares exchanging hands. The selloff reflects growing investor concern over the impact of AI automation on legacy enterprise systems, an area where IBM has traditionally generated steady revenue.
International Business Machines Corporation, IBM
AI Automation Sparks Market Concerns
Anthropic introduced Claude Code, a tool designed to streamline COBOL system upgrades, reducing what previously took years to just a few quarters. COBOL continues to power critical sectors, including U.S. banking, government IT, and air travel, handling roughly 95% of ATM transactions. Investors fear that automation tools could cut the demand for external consulting and legacy software services, directly affecting billable hours and fees for companies like IBM.
“Sell first, assess later,” said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management, describing the market’s reaction to AI developments.
The Dow fell 1.66%, the S&P 500 declined 1.04%, and the Nasdaq slipped 1.13% as AI concerns joined other macro factors, including tariff uncertainties.
Consulting Giants Feel the Pressure
IBM is not alone. Accenture and Cognizant, which rely heavily on legacy system consulting contracts, each saw shares decline by roughly 6% as Wall Street reassessed exposure to automation-driven disruption. Market analysts highlight that companies closely tied to enterprise spending are among the first to face investor scrutiny when AI adoption threatens labor-intensive workflows.
While Claude Code promises faster COBOL modernization, experts caution that large-scale migrations remain complex. Regulatory approvals, operational risks, and testing requirements still require human oversight, slowing adoption despite AI efficiency gains.
IBM Pushes Growth Narrative Despite Setback
Despite the market jitters, IBM continues to report robust growth in other areas. Fourth-quarter software revenue rose 14% to $9.0 billion, while infrastructure sales climbed 21%, boosted by a 67% increase in IBM Z mainframe revenue. CEO Arvind Krishna emphasized that IBM’s generative AI business now surpasses $12.5 billion, signaling continued confidence in long-term growth prospects.
Investors will be closely watching IBM at the upcoming Morgan Stanley Technology, Media, and Telecom Conference on March 3, followed by first-quarter earnings on April 22. The market response to Anthropic’s AI tool may prompt discussions on IBM’s strategy for balancing legacy software projects with emerging automation technologies.
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