International Business Machines (NYSE: IBM) has been under severe pressure in February, with the month being on track to become the firm’s worst in more than 50 years.
The situation was especially exacerbated by a seemingly optimistic announcement made on February 23 by the artificial intelligence (AI) company Anthropic that led to a catastrophic 13.15% drop for IBM stock.
Indeed, the latest session plunge to $224.50 means that this Monday was International Business Machine’s single worst day in the 21st century.
Looking at the specifics, Anthropic’s claim that its AI can help modernize the COBOL infrastructure and resolve the growing developer bottleneck was the main cause for IBM’s crash.
Why IBM stock is crashing
Specifically, COBOL – a decades-old programming language that helps facilitate large-scale transactions worldwide – has been a critical part of International Business Machine’s business.
Simultaneously, it has been subject to a bottleneck as reports indicate that there are fewer developers who understand the system-critical language, as the majority of new programmers are trained in the more widely-utilized Python or Java.
“Hundreds of billions of lines of COBOL run in production every day, powering critical systems in finance, airlines, and government. Despite that, the number of people who understand it shrinks every year. The developers who built these systems retired years ago, and the institutional knowledge they carried left with them. Production code has been modified repeatedly over decades, but the documentation hasn’t kept up,” Anthropic wrote on Monday.
Are IBM investors overreacting to Anthropic’s blog post?
Interestingly, investor reaction to the blog posts was arguably overblown. Much like the late January and early February plummet in the legal software sectors, Anthropic has not disputed the importance of COBOL and instead outlined how AI can make modernization faster:
“AI starts by reading your entire COBOL codebase and mapping the structure. It identifies program entry points, traces execution paths through called subroutines, maps data flows between modules, and documents dependencies that span hundreds of files,” Anthropic wrote in the blog post, while emphasizing that “With AI, teams can modernize their COBOL codebase in quarters instead of years.”
Still, it is difficult to deny that, in the long run, International Business Machine’s business and IBM stock are under severe pressure due to the new cutting-edge technology.
Between its efforts to use AI to modernize the language and the accompanying “The Code Modernization Playbook,” Anthopric might indeed be coming after the blue-chip’s key COBOL-tied performance upgrades, software licences, and hardware.
Featured image via Shutterstock
