IBM shares tumble as Anthropic’s AI claims on COBOL modernization unsettle investors

Summary

IBM shares fell sharply — marking their steepest daily drop since 2000 — after Anthropic said its AI coding tools could significantly speed up modernization of legacy COBOL systems. The move sparked investor concerns about potential disruption to a key services market tied to IBM’s mainframe ecosystem.

Shares of International Business Machines dropped about 13%, their biggest one-day decline in more than two decades, after comments from AI startup Anthropic highlighted the potential for new tools to accelerate upgrades of legacy systems written in COBOL.

COBOL remains widely used in core systems across banking, insurance, and government, often running on IBM mainframes. Modernizing these systems has historically required large, multi-year consulting engagements — a steady source of revenue for IBM.

Anthropic said its coding tool, part of its Claude platform, could automate significant portions of the discovery and analysis process involved in updating legacy code, potentially shortening project timelines.

Market reaction reflects disruption fears

Investors interpreted the comments as a signal that AI-driven automation could compress the timelines and costs associated with legacy modernization projects — a market where IBM has long held a strong position.

The broader software sector also saw pressure as investors reassessed how quickly AI-powered development tools might alter enterprise spending patterns and vendor relationships.

IBM’s structural advantages remain

Despite the market reaction, IBM retains entrenched relationships with large enterprises and deep expertise in regulated industries, integration, and mission-critical infrastructure — factors that may continue to support demand for its services.

Still, the episode highlights growing sensitivity among investors to signs that generative AI could erode traditional consulting and services revenue models.

Why this matters

The sharp stock move underscores a broader shift in the enterprise technology landscape: AI is moving beyond experimentation and into core operational workflows.

If AI tools can materially reduce the time and cost required to modernize legacy systems, they could reshape how companies allocate IT budgets — potentially shifting spending toward software automation and away from long consulting cycles.

For legacy technology providers, the challenge will be adapting service models to a world where AI accelerates development and reduces technical barriers.

FAQs

Q1. Why is COBOL significant for IBM?

Many mission-critical systems — particularly in finance and government — run on COBOL applications hosted on IBM mainframes, creating ongoing demand for maintenance and modernization services.

Q2. What did Anthropic say?

The company said its AI coding tools could automate parts of legacy code analysis and help shorten modernization timelines.

Q3. Does this threaten IBM’s business model?

It could increase competitive pressure, but IBM’s deep client relationships and expertise in integration and compliance remain important advantages.

Q4. Why did the stock fall so sharply?

Investors reacted to the possibility that AI automation could reduce the size or duration of consulting engagements tied to legacy systems.

Q5. Could AI accelerate enterprise modernization?

Yes. If tools meaningfully reduce cost and complexity, organizations may move faster to update older systems.