IBM stock rebounded on Tuesday, climbing around 4% to $234.68, as investors reassessed the previous day’s steep decline and weighed analyst views on the company’s long-term prospects.
The recovery followed a sharp selloff on Monday, when the stock plunged more than 13% after concerns emerged about potential disruption to IBM’s legacy mainframe business from artificial intelligence-driven software tools.
The decline marked IBM’s largest single-day drop in more than 25 years.
For the month so far, shares are down 27%, putting the company on track for its worst monthly performance since 1992.
Anthropic announcement triggers market fears
The selloff was sparked by a blog post from Anthropic, which highlighted AI-enabled tools for modernising COBOL-based systems.
Anthropic said its “Claude Code” tool can automate COBOL modernisation, raising fears that enterprises could more easily migrate away from IBM’s mainframe ecosystem.
Investors interpreted the announcement as a potential threat to IBM’s long-standing dominance in mission-critical computing workloads.
Because mainframes remain a core component of IBM’s enterprise offering, particularly in highly regulated industries, concerns about accelerated migration led to a rapid reassessment of the stock’s valuation.
Wall Street analysts remain bullish
Analysts were quick to push back against the more pessimistic interpretation.
Evercore ISI analyst Amit Daryanani, who maintains an Outperform rating and a $345 price target on IBM, said customers have had decades to move away from mainframes but have largely chosen to stay.
He cited advantages including 100% uptime, better cost efficiency, on-premise AI inferencing offerings, quantum-safe encryption, and regulatory considerations.
Daryanani added that despite IBM offering modernisation tools such as watsonX Code Assistant for Z, the company has continued to see strong demand for its latest hardware.
He noted that IBM’s z17 system has outperformed the previous z16 cycle through the first three quarters of its rollout, indicating sustained customer commitment to the platform.
Jefferies reiterates buy rating on IBM stock
Jefferies also reaffirmed its positive stance on IBM, reiterating a Buy rating and a $370 price target.
The firm said IBM is already addressing the risks posed by AI code assistants through its own watsonx Code Assistant for Z, which integrates generative AI directly into mainframe environments.
According to Jefferies, the tool enables customers to refactor COBOL applications into Java while preserving full system context, reducing the incentive to abandon IBM’s infrastructure.
The firm added that IBM’s broader growth strategy does not depend solely on mainframes, but also on momentum in hybrid cloud, artificial intelligence, automation, and data services.
Jefferies said these segments remain central to the company’s long-term software reacceleration.
Following the recent selloff, IBM’s valuation has become more compressed, according to analysts.
The stock now trades at roughly 18 times projected 2026 earnings and about 16 times this year’s free cash flow, levels that some investors view as more attractive relative to historical averages.
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