IBM: What Its Earnings Misses Say About the State of AI Right Now
2026-07-15 12:35
•Stefon Walters •The Motley Fool
••••• ••• Axe Capital view
IBM’s Earnings Mix Signals a Hardware-Led AI Shift
AI spending is moving away from software to hardware, and South Africa’s rand and tech sector should take note.
IBM’s recent earnings miss and a sharp 25% share plunge show that the AI boom isn't a straightforward software story. Companies building AI models have hit a bottleneck: they need more servers, memory, and storage—not just fancy software. This hardware crunch benefits players like Micron and SanDisk overseas, but South African investors should watch the USD/ZAR closely. A higher rand weakness supports local firms that import expensive tech components as global demand for data centers ramps up. Meanwhile, big JSE tech names like Naspers and Prosus trade with an eye on global tech trends. This moment highlights growing pains in AI infrastructure, and investors betting only on software providers might be caught off guard if hardware prices stay high. Of course, if IBM regains footing with new AI software innovations or supply constraints ease, that could reverse the trend. this is just my opinion and not financial advice
Watch USD/ZAR and consider adding Naspers or Prosus on dips since they have some exposure to global tech infrastructure. Avoid IBM in the near term given uncertainty about AI spending shifts.
- USD/ZAR
- Naspers
- Prosus
- Supply chain improvements that reduce hardware prices
- IBM successfully pivoting back to software-led AI growth
7/10
IBM released preliminary Q2 results showing revenue of $17.2B (up 1% YoY) and adjusted EPS of $2.93, both below expectations. The company revealed that AI spenders are shifting budgets away from software toward servers, storage, and memory due to supply constraints and rising prices. IBM's stock plunged 25% in a single day—its worst day in company history. Meanwhile, memory and storage companies like SK Hynix, Micron, and SanDisk are thriving as demand for data center infrastructure surges.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Stefon Walters
Categories: Equities, Earnings, Technology, AI, Semiconductors
Tickers: IBM, MU, SNDK
Sentiment: Mixed - IBM missed earnings expectations with minimal revenue growth (1% YoY) and issued a warning about shifting AI spending priorities away from its software business. The stock experienced its worst single-day drop in company history (25%), indicating severe investor disappointment and uncertainty about future growth. Micron is one of the market's hottest stocks, up 728% in the past 12 months, driven by strong demand for memory and storage hardware needed for AI infrastructure buildout.
Keywords: AI spending shift, earnings miss, software decline, hardware demand, memory shortage, data center infrastructure, supply constraints
Insights:
- IBM: Negative: IBM missed earnings expectations with minimal revenue growth (1% YoY) and issued a warning about shifting AI spending priorities away from its software business. The stock experienced its worst single-day drop in company history (25%), indicating severe investor disappointment and uncertainty about future growth.
- MU: Positive: Micron is one of the market's hottest stocks, up 728% in the past 12 months, driven by strong demand for memory and storage hardware needed for AI infrastructure buildout.
- SNDK: Positive: SanDisk has surged over 4,700% since being spun off from Western Digital in February 2025, benefiting from the dramatic increase in demand for data storage solutions in the AI ecosystem.