The AI scare trade is taking no prisoners.
And I mean no prisoners.
IBM (IBM) shares sold off to the tune of 13.5% on Monday after Anthropic renewed fears that AI code assistants could disrupt legacy COBOL (Common Business-Oriented Language) workloads.
Anthropic said in its new blog post that hundreds of billions of lines of COBOL remain in daily production across finance, airlines, and government. It argued that AI can now automate analysis tasks that historically made modernization slow and costly. COBOL has a starring role in mission critical infrastructure such as payments and financial systems, areas where IBM has been the leader for years.
The market shot first and asked questions later on IBM, causing $31 billion in market value to go up in smoke. Shares are only up slightly on Tuesday.
Here’s what I am hearing the day after the IBM rout.
“IBM has been investing in code modernization for years — both through skilling initiatives and through our own generative AI capabilities. More than two years ago, we launched watsonx Code Assistant for Z (IBM’s mainframe) because we understand the benefit of AI in modernizing code. New AI tools emerge every week, including our own. What they do not change is the fundamental engineering challenge of running mission-critical workloads at scale. Translating COBOL is the easy part. The real work is data architecture redesign, runtime replacement, transaction processing integrity, and hardware-accelerated performance built over decades of tight software and hardware coupling. That is the problem IBM has spent decades learning to solve, and AI is the most powerful tool we have ever had to do it.”
“Our sense is, clients already had the option to migrate from the mainframe, yet they are sticking with the platform due to several advantages including 1) Reliability: 100% uptime and the ability to hot swap components (even the best run clouds might only have 5-6 nines of uptime), 2) speed, volume, & throughput, 3) better cost efficiency at scale, 4) On-prem AI inferencing capabilities for real-time analytics, 5) Security: Quantum-safe encryption, and 6) Regulatory Considerations: Mainframes are widely used by sensitive industry verticals such as governments, healthcare, & financial services (migrating to public cloud not an option). We think customers choose to remain on mainframe given these advantages despite the availability of alternatives for several decades. We therefore believe today’s sell-off is unwarranted and would be buyers on weakness … Maintain Outperform rating and $345 target.” -Evercore analyst Amit Daryanani
