IBM SHARES FALL 20% AFTER WARNING OF CUSTOMER SPENDING SHIFT

IBM shares fell more than 20 per cent after the technology company warned that customers were redirecting spending away from software towards artificial intelligence infrastructure. The decline wiped more than $50bn from IBM's market value, marking the stock's largest single-day fall since the 1987 market crash. The selloff dragged the Dow Jones index lower as investors reassessed whether the artificial intelligence spending boom was beginning to damage the software sector. IBM reported preliminary second-quarter revenue expectations of $17.2bn and adjusted earnings of $2.93 per share, both falling short of Wall Street forecasts.

Chief executive Arvind Krishna stated that the company had not responded quickly enough to an unexpected shift in customer spending patterns. In late June, clients redirected quarterly capital expenditure budgets towards servers, storage and memory equipment required to power artificial intelligence systems, Krishna wrote in a letter to investors. IBM had anticipated some disruption from supply chain pressures but underestimated the scale of the reallocation. Several large software deals were postponed beyond the quarter as businesses reprioritised their capital allocation.

Shares of software and information technology services companies declined across the market following IBM's announcement. Chipmakers and memory manufacturers such as Micron and SK Hynix have recorded gains from increased demand for artificial intelligence hardware. Analysts questioned whether customers would sustain reduced software spending if the shift towards infrastructure investment persisted beyond the coming months. IBM's preliminary results announcement was unusual, as the company rarely issues advance notice before scheduled earnings releases.