Key insights
- The author argues IBM is undervalued and poised for growth due to its AI infrastructure and quantum computing leadership, drawing parallels to Nvidia's earlier growth phase. Strong Q1 2026 earnings and a lower P/E ratio compared to peers are highlighted. The company's established relationships with regulated industries and recent quantum computing award from the US government are presented as bullish catalysts. The author suggests the YTD stock decline offers an attractive entry point.
IBM is a classic boring compounder that's quietly turning into a legitimate AI infrastructure play. Q1 2026 revenue came in at $15.9B, up 9.5% YoY, a combo of software, infrastructure and mainframe--enterprises are now running AI inferencing workloads directly on IBM hardware. Operating margins expanded 140 basis points and earnings are up nearly 20% YoY. The P/E sits at roughly 22.6, forward P/E of 17.3 (compare to 22 for microsoft and 23 for oracle. The bull case is straightforward: IBM's hybrid cloud + AI stack is sticky with large regulated enterprises — banks, governments, healthcare — that can't just shift to hyperscalers. The stock is down 16% YTD, creating a potential entry point. They were singled out as the primary recipient of the recent US federal government quantum award -- this is the main story: they've already been identified as the leader in quantum computing. Think about where AI was 6 years ago and what happened to Nvidia since that time. If you missed out on Nvidia, this could be your second chance.
$IBM
Current share price: $249