Stock Market Today, July 14: IBM Plunges on Second-Quarter Warning as AI Shifts Enterprise Spending

International Business Machines (NYSE:IBM), an enterprise software, consulting, and mainframe infrastructure provider, closed at $217.05, down 25.21%. The stock plunged after IBM issued a preliminary second-quarter warning, and investors are watching July 22 results for more details.
Trading volume reached 64.0 million shares, coming in about 551% above its three-month average of 9.8 million shares.

How the markets moved today

The S&P 500 (SNPINDEX:^GSPC) rose 0.38% to 7,544, while the Nasdaq Composite (NASDAQINDEX:^IXIC) added 0.90% to 26,107. Among technology hardware, software, consulting, and IT services peers, Accenture (NYSE:ACN) fell 2.86% to $134.56 and DXC Technology (NYSE:DXC) dropped 5.66% to $9.16 as budget pressure and weaker consulting demand stayed in focus.

What this means for investors

IBM’s stock had its worst day in the company's 115-year history after its surprise Q2 warning. The company said customers have shifted IT budgets away from its software and infrastructure offerings, focusing on artificial intelligence (AI) hardware to ensure adequate supply.

IBM CEO Arvind Krishna noted that server and memory purchases are now priorities. He also stated that “rapidly-evolving, industry-wide cybersecurity concerns” are attracting more attention.

Investors took that cue to unload IBM stock and load up on cybersecurity and AI hardware names. IBM had been a beneficiary of the AI trade, with shares more than doubling over the last three years. But now it seems to be the wrong place for new money.

Investors can also take this news as affirmation that AI infrastructure names likely have more upside ahead.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool has a disclosure policy.