Since 2020, IBM CEO Arvind Krishna has helped reposition the company around AI and cloud. Stefan Vermuth—Bloomberg via Getty Images
IBM’s repositioning around AI could be a boon as the company’s stock nears all-time highs amid its CEO’s ambitious technology plans.
The company’s stock has soared 19% since the beginning of the year and closed Wednesday at $193.96, just 6% off its 2013 all-time high of $206.31. Year-to-date, the technology company’s stock has outperformed its stock price. The Magnificent Seven is the company that excludes popular chipmaker Nvidia and social media giant Meta.
IBM CEO Arvind Krishna said in an interview last year that AI could replace thousands of employees in “back-office” roles such as human resources. He later backtracked, saying AI would create more jobs than it replaces, but reiterated that “back-office and white-collar jobs” would be affected first.
At his own company, he has used AI to reduce the number of employees working on relatively manual human resources tasks from 700 to about 50, freeing them up to focus on other things. , he wrote in an April review. luck. In its fourth quarter results in January, the company announced that it would cut costs by $3 billion in 2024, down from the previous $2 billion. As part of the move, the company laid off thousands of employees, some of which it later revealed was due to the impact of AI.
“This balancing act reflects our continued commitment to improving productivity and aligning our workforce with the most in-demand skills among our customers, particularly in areas such as AI and hybrid cloud,” an IBM spokesperson said. It will be driven by initiatives.” register During February.
It’s reminiscent of the late ’90s, when investors rushed to pour money into just about any company involved in AI (so much so that the SEC cracked down on so-called “AI laundering”). So far in 2023, this trend has led to soaring stock prices for Google, which has its own AI chatbot, and Microsoft, which has a profit-sharing deal with AI leader OpenAI.
But while these companies are getting the most buzz for their AI capabilities, IBM has strengthened its AI offerings and quietly outpaced Google and Microsoft in the public market.
The 112-year-old technology company has been researching and developing its own artificial intelligence technology since the 1950s, and gained a lot of attention when its supercomputer Watson broke the world. danger! But despite its head start, IBM’s AI efforts have been surpassed by OpenAI, which ignited the current AI mania with the release of its chatbot ChatGPT in late 2022.
Still, with CEO Krishna, who took over as CEO in 2020, spearheading the transformation, IBM is working to make the most of years of hard work by repositioning its business around cloud and AI. Ta. In May, the company launched Watsonx, an in-house AI model development platform for enterprise customers. We also have more than 1,000 consultants dedicated to helping customers such as Spanish bank BBVA and German software company SAP SE develop models using their own data. Within IBM, three-quarters of chip design is already done by AI, Krishna previously said.
The company may already be attracting attention for its AI efforts. During a fourth-quarter earnings call in January, Mr. Krishna said IBM’s book of business was twice as large as it was in the third quarter, when it was “in the low hundreds of millions of dollars.” Morgan Stanley analysts estimate the company’s book value at about $400 million.
“Our approach to AI in business is resonating,” Krishna added in prepared remarks.
Morgan Stanley analysts led by Eric Woodring said in a January note that if IBM’s AI business emulates the payoff from its 2019 acquisition of Red Hat, another big bet, the business will be worth a small fortune. He said it could be worth billions of dollars in four years.
Still, analysts warned that there are obstacles to IBM’s momentum.
“[T]The question is whether this AI spending is purely incremental or is it cannibalizing other areas of customer spending with IBM,” the analysts wrote.
