Say this much for Big Blue: It’s got staying power.
International Business Machines (IBM) was founded in 1911, back when William Howard Taft was president, as Computing-Tabulating-Recording Co., a holding company for manufacturers of record-keeping and measuring systems.
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The name changed to IBM in 1924 and the company soon became the leading maker of punch-card tabulating systems.
During the 1960s and 1970s the IBM mainframe, exemplified by the System/360, was the world’s dominant computing platform, with the company producing 80% of computers in the U.S. and 70% of computers worldwide.
Here in the 21st century, specifically on March 18, the tech giant unveiled a collaboration with AI-chip colossus Nvidia (NVDA) .
IBM Chairman and CEO Arvind Krishna. The company unveiled a partnership with AI-chip giant Nvidia. Photo: Prakash Singh/Bloomberg via Getty Images
IBM’s software segment growing
This includes planned new integrations based on the Nvidia AI Data Platform reference design. The goal is to help enterprises more effectively put their data to work to help build, scale and manage generative-AI workloads and agentic-AI applications.
Shares of IBM, which is scheduled to report first-quarter earnings on April 23, have climb 12.6% year-to-date and nearly 30% from a year ago.
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In January, IBM beat Wall Street’s fourth-quarter earnings and revenue expectations.
Software-segment revenue grew 10% year over year to $7.9 billion, due partly to demand for artificial-intelligence technology and a strong performance from its Red Hat Linux operating system.
Wedbush analyst Dan Ives and his team have been focusing on AI software, declaring in a March 24 research note that “now the time has come for the broader software space to get in on the AI revolution.”
The analyst said the investment firm had been monitoring dozens of large companies that have embarked on the AI path in 2025 to gauge enterprise AI spending, use cases, and which vendors are separating from the pack in the AI revolution.
“Overall we estimate AI is now comprising roughly 12% (up from 10% in January) of many IT budgets for 2025 we are tracking, and in some cases up to 15%,” Ives wrote. That’s “as many CIOs have accelerated its AI strategy over the next 6 to 9 months as monetization of this key theme is starting to become a reality across many industries.”
While the first steps in AI deployments are around Nvidia chips and the cloud stalwarts, Ives said, Wedbush estimates that for every $1 spent on Nvidia, there is an $8 to $10 multiplier across the rest of the tech ecosystem.
Analyst names IBM to ‘Best Ideas List’
“So far about 70% of customers we have spoken with [that are] heading down the AI path have accelerated their AI budget dollars and initiatives over the last six months, speaking to the sheer speed of this tech-spending cycle,” he said.
While there is a lot of noise in the software world around driving monetization of AI, Ives said, a handful of software players have started to separate themselves from the pack.
Related: Analysts revisit IBM stock price targets as shares hit record high
“The AI Software era is now here…,” he said, naming big-data company Palantir (PLTR) and customer relationship management platform Salesforce (CRM) as the two best software plays on the AI Revolution for 2025.
Ives said many well positioned vendors, including IBM, are joining the AI-spending cycle.
“We are now adding IBM to the Wedbush Best Ideas List, reflecting our incremental confidence in this name,” the analyst said.
“In a nutshell, investors remain nervous about the AI-spending trajectory in this backdrop. yet to the contrary we see many enterprises accelerating their strategic paths for 2025, which is bullish for the software ecosystem,” he added.
Although IBM remains committed to investing in further driving growth, Wedbush said, the company looks to balance growth with operating leverage into its business model to drive its free cash flow, which is expected to be roughly 2 to 3 points above revenue growth.
“With AI expected to drive $4.4 trillion in annual productivity gains by 2030, … IBM is well-positioned to capitalize on the current demand shift for hybrid and AI applications as more enterprises look to implement AI to drive efficiencies across operations,” the firm said.
Wedbush has an outperform rating on IBM with a $300 stock price target.
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