IBM Falls Most Since At Least 1968 on Sales Miss

Summary

IBM shares had their worst day since at least 1968 following a Q2 sales miss that Anurag Rana attributes to customers diverting budgets to servers ahead of rising memory prices. He warns the same headwind will pressure enterprise software subscription names and sees Microsoft's heavy AI capex as a valuation risk, while the structural shift of free cash flow to hardware continues to benefit chipmakers and memory.

• IBM stock plunged on a sales miss driven by enterprise customers pre-buying servers as memory prices climb.
• Rising memory costs are forcing hardware budget priority, cannibalizing spend on IBM services and software.
• Enterprise software firms SAP, ServiceNow, Salesforce, and Workday face subscription growth headwinds from the same budget shift.
• Microsoft is under pressure to justify its massive AI capex with falling valuation, while Amazon is slightly better positioned with its own chips.
• A multi-year structural shift of free cash flow from software to chips and hardware shows no signs of slowing.
• ASML, TSMC, and memory producers stand to benefit from the enduring hardware capex cycle.
• GPU-as-a-service neo clouds like CoreWeave and Nebius could be vulnerable if liquidity tightens.