Key insights
- IBM stock reached a new record high, driven by investor enthusiasm for the AI trade and positive analyst sentiment from Barclays. The company's strategy, likened to Nvidia's 'playbook,' focuses on quantum computing and a defensible software portfolio. This surge, coupled with broader tech sector strength and government support for its quantum business, suggests continued growth potential and improved profit margins, positively impacting the broader tech market.
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IBM is the latest tech stock to set fresh records as investors pile into the AI trade.
Shares of International Business Machines (IBM) were up over 9% near $325 in recent trading, leaving them on track for a closing record after reaching a fresh intraday high at $327.89. It was one of the top gainers in the S&P 500 and Dow Jones Industrial Average after receiving a new vote of confidence from Wall Street analysts, and amid a broader tech rally following a flurry of announcements from IBM partner Nvidia (NVDA), including an AI chip designed for PCs.
The move marks a stunning turnaround for IBM's stock, which returned to positive territory for the year on Friday after rebounding nearly 40% from its lows in early May.
IBM's recent surge to new highs comes amid improving sentiment around the AI trade after a string of strong earnings reports from Nvidia and other hardware makers, along with a show of support from the U.S. government for IBM's quantum computing business.
Analysts at Barclays, who launched coverage of IBM stock today with an "overweight" rating and Street-high target of $350, said they believe it could be "following the Nvidia playbook" in quantum computing as an early leader in the industry with an "ecosystem approach" to building the market for its offerings.
The analysts also said they believe IBM has "created a stable growth engine around its very defensible software portfolio," that will lead to continued growth and better profit margins.1 "While software has a negative investor connotation at the moment, IBM is offering infrastructure software (the good part) to large, often heavily regulated customers, which creates a very sticky set-up that should not see negative AI implications," they wrote.
Wall Street analysts are broadly bullish on IBM. All but one of the six analysts with current ratings tracked by Visible Alpha have recommended buying the stock, compared to one neutral rating, though it's already blown past their mean target around $299 with its recent gains.