CA - IBM: Missing Out On The Actual AI Opportunity

2024-05-29 17:01:04 ET

Summary

• IBM's AI-related revenues are not generating significant sales despite numerous partnership and collaboration announcements.
• The company's GenAI business remains relatively small, and the backlog is not large enough to make a significant impact.
• IBM's lack of investment in AI and cutting back on capex raises concerns about its ability to capitalize on the AI opportunity.
• The stock is already fully priced at 16x '25 EPS targets, with forecasts for limited growth.

After the prior quarter, we warned investors not to buy into the AI hype at International Business Machines Corporation ( IBM ). The tech giant has long had a leading artificial intelligence, or AI, product in Watson without producing any meaningful revenue. My investment thesis remains Neutral on the stock following another weak quarter and all signs the company isn't really investing into the AI opportunity....

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