IBM Stocks Drop 13% on Anthropic AI Threat
Synopsis
IBM has become the latest casualty of the AI revolution as its stock price plummeted 13% on Monday. The drop came after Anthropic announced that its Claude Code tool can assist in modernising COBOL, when the language is used. This venerable programming language is the backbone of global finance and has given IBM a stable revenue stream for more than half a century. Anthropic says its AI can now analyse and rewrite complex documents that used to take days of costly human labour. As AI starts to unravel the issue of technical debt for large enterprises investors are wondering whether IBM can hold onto its position in the big money space of mainframe computing.
IBM’s stock crashed nearly 13% on Monday after Anthropic announced a new AI tool that can update COBOL code dating back decades. This ancient programming language still runs most of the world’s banking and airline systems, and has been a mainstay of IBM’s business for decades.
Key Highlights
- IBM fell more than 13% on Monday hitting a new low for the year
- Anthropic now have the AI rewriting COBOL, a coding language used by banks and airlines
- These older systems have been a huge part of IBM’s annual profits for decades
- Investors worry AI will replace the pricey human experts IBM now supplies
A Major Blow to a Tech Giant
It was a tough day on Wall Street for IBM, whose shares fell more than 13 per cent. The swing, which was sudden, came after a company called Anthropic unveiled new technology that could disrupt IBM’s oldest and most reliable business. For decades, IBM has made billions helping big corporations manage antiquated computer systems. Now investors are concerned that artificial intelligence can perform the same work faster and for far less money. The sell-off has erased a substantial chunk of the company’s market value in just a few hours.
The Threat to an Ancient Language
The large problem centres on a programming language from the 1950s called COBOL. This language is very old but still powers much of the world’s financial systems today. Almost every ATM transaction in the United States, experts estimate, is built on COBOL code. Now only a few young people are learning this language so companies need to pay IBM experts a lot of money to keep these systems from functioning. Anthropic says its new AI tool can read and rewrite these billions of lines of code without much human help.
AI Flips the Cost Equation
Until recently, many of the largest banks and government agencies were too scared to update their systems because doing so was too costly and risky. Their new Claude Code tool reveals how these old systems work in literally just minutes, Anthropic wrote. Tasks that used to take human analysts months can now be done nearly instantaneously by a computer. That makes it far less expensive for a company to wean itself from IBM’s pricey mainframe computers and adopt modern technology instead.
Most big companies today are burdened with what engineers refer to as technical debt. This is related to the cost of keeping legacy software alive that was built with lots of shortcuts many years prior. This debt makes companies increasingly vulnerable as the number of people who understand COBOL decreases each year. Anthropic is branding its AI as the final key to erase this debt once and for all. They are automating the most difficult sections of that role and stealing IBM’s steady revenues they have revelled in for decades.
A New Wave of AI Fears
IBM isn’t the only company feeling the heat of new A.I. developments. Just this past Friday, stock prices of several major cybersecurity firms plunged for reasons like these. So investors are in a sell-first-ask-questions-later mood whenever a new AI tool is revealed. This movement foreshadows the market’s anxiety over which legacy tech companies will thrive during the AI boom. Those fears have helped drive IBM shares down more than 24% since the start of the year.
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