Investing.com – Shares in International Business Machines (NYSE:IBM) has surged so far this year, spurred on by hopes around the software group’s artificial intelligence ambitions.
IBM has said that it now has a “book of business” for its ChatGPT-like generative AI that is worth $6 billion, while CEO Arvind Krishna has said that customer interest in utilizing different AI models would likely fuel demand in the future.
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The company has also been specializing in developing tools that allow clients to build out their own AI-enhanced agents. Speaking to Reuters in May, Krishna suggested that, using IBM’s Granite suite of AI models, along with alternatives from Mistral and Facebook-owner Meta Platforms (NASDAQ:META), these agents could be constructed in mere minutes.
These capabilities will lead to an acceleration of the rate of growth of its AI operations, Krishna said at the time.
The comments came after IBM announced in April that it would invest some $150 billion in the United States, where it has long had a presence as a manufacturer of mainframe computers. Krishna noted that quantum computers — a new type of computer that harnesses quantum mechanics to carry out tasks — will also be made in the country.
“There’s going to be a very healthy market that behooves us to invest and lean in,” Krisna told Reuters.
Yet, even as optimism surrounds IBM’s AI ambitions, a murky economic outlook clouded its most recent earnings. Faced with the looming threat of sweeping U.S. tariffs, analysts have warned that many companies may be reining in spending, potentially weighing on IBM’s key consulting arm.
A push by U.S. President Donald Trump’s administration to slash government spending has also led to the shelving of 15 federal contracts at IBM that accounted for $100 million in business.
Revenue from the consulting segment slipped in the most recent quarter by 2%, although IBM backed its 2025 target for top-line growth on a constant currency basis of at least 5%.
Writing in a note to clients, analysts at BofA led by Wamsi Mohan said that IBM shares, despite trading at all-time highs, are “interesting due to the transformational initiatives undertaken by management.”
“IBM underwent a significant transformation over the last five years by shifting their software segment towards strategic M&A investments, shedding lower growth/high cost businesses, and rebalancing their portfolio towards cloud and AI trends,” the brokerage wrote.
However, they flagged that less rosy assessments of the stock have highlighted that IBM is “structurally under-owned and underweight.”
