IBM’s recent focus on artificial intelligence (AI) appears to be yielding positive results, with the company’s stock approaching an all-time high in response to the optimistic technology plans outlined by its CEO.
Since the beginning of the year, IBM’s shares have surged by 19%, closing at \(193.96 on Wednesday, just 6% below its peak of \)206.31 in 2013. Notably, the technology giant’s stock performance has outpaced that of the Big Seven, with the exception of Nvidia and Meta.
In a recent interview, IBM’s CEO, Arvind Krishna, hinted at significant changes within the company, suggesting the potential replacement of numerous “back-office” roles, such as human resources, with AI technology. While Krishna later revised his statement, indicating that AI might actually create more job opportunities than it displaces, he underscored the imminent impact on “back-office, white-collar work.”
Krishna highlighted IBM’s internal use of AI to streamline operations, citing a reduction in the workforce dedicated to traditional personnel tasks from approximately 700 employees. This strategic shift allowed these individuals to refocus their efforts on other critical areas. Additionally, IBM announced plans to increase cost savings to $3 billion in 2024, partly attributed to workforce reductions facilitated by AI integration.
A spokesperson for IBM emphasized that the company’s restructuring efforts aim to enhance efficiency and align workforce skills with client demands, particularly in AI and hybrid cloud technologies.
Investors have shown a keen interest in companies involved in AI, reminiscent of trends observed in the late 1990s, leading to a surge in stock prices for firms like Google and Microsoft, which have made significant strides in AI development. Despite IBM’s longstanding history in AI research dating back to the 1950s and notable achievements such as Watson’s victory on Jeopardy! in 2011, newer players like OpenAI have garnered attention for their advancements in AI technology.
IBM has refocused its business strategy around cloud computing and AI under Krishna’s leadership, with initiatives like Watsonx aimed at empowering business clients with AI solutions. The company has bolstered its AI capabilities by hiring over 1,000 experts to collaborate with clients on leveraging data for model development. Krishna revealed that a significant portion of IBM’s device design is now driven by AI, reflecting the organization’s commitment to integrating AI across its operations.
IBM’s AI endeavors have shown promising signs of growth, with Krishna reporting a doubling of the company’s business reserves in the third quarter of the year. Analysts at Morgan Stanley estimate the business valuation to be around $400 million, underscoring the positive reception of IBM’s AI-focused approach among stakeholders.
While IBM’s AI investments hold substantial potential for future growth, analysts caution that challenges remain, particularly concerning the balance between AI development and existing customer spending patterns. The analysts raise questions about whether IBM’s AI initiatives will complement or compete with other areas of customer investment within the company.
