When one of Wall Street’s oldest tech giants publishes a weak report and its shares decline, the initial reaction of many market participants is understandably one of worry. But if we look deeper into IBM’s (IBM) recent preliminary results, we do not see just the difficulties of a single corporation, but an important leading indicator…
When one of Wall Street’s oldest tech giants publishes a weak report and its shares decline, the initial reaction of many market participants is understandably one of worry. But if we look deeper into IBM’s (IBM) recent preliminary results, we do not see just the difficulties of a single corporation, but an important leading indicator for the entire stock market. This indicator points to the fact that a second, larger wave of investment in artificial intelligence (AI) has already begun.
Let’s break down what exactly is going on with IBM — and why it’s very important for the semiconductor sector, server manufacturers, and the traditional software segment as a whole.
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What Happened to IBM?
At first glance, the situation with IBM looks pretty standard. On July 14, the company presented preliminary results for the second quarter that fell short of analysts’ expectations. The price action of IBM stock reacted with a decline, seeing shares fall 25% the same day.
For the company itself, this is a sensitive moment. Sales of high-margin software showed moderate growth of 5%. However, revenue from the infrastructure division — including mainframes and heavy servers, on which a significant part of the global banking system depends — notably decreased.
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The main point here is hidden in management’s comments. Specifically, CEO Arvind Krishna acknowledged that IBM’s clients appear to be temporarily freezing planned budgets for software and classic server solutions. These funds are being promptly redirected to the purchase of equipment for AI.
“In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases,” said Krishna. “This dynamic impacted client buying patterns.”
Investors should take this statement seriously. In my view, this is not just an explanation from management, but an important signal about what’s happening in the U.S. economy.
Budget Dilemma: Hardware vs. Software
To assess the scale of what is happening here, it is important to recall the structure of IBM’s client base. These are not startups, but large multinational corporations — systemically important banks, global retail chains, logistics giants, and airlines.
The IT budgets of these companies are large, but they have their limits. Traditional business now faces a tough choice. Due to the active development of AI, a shortage of computing power has risen in the market. Companies in the real sector understand that without the timely purchase of AI servers, graphics cards, and memory, they risk falling behind competitors.
As a result, big business is apparently making a pragmatic decision; traditional software and old server racks can wait. These companies’ available resources are now being directed to the acquisition of hardware for working with AI.
The First Wave vs. The Second Wave: What Is the Difference?
IBM’s indicators essentially confirm the market’s transition to the next wave of AI transformation.
The first wave, spanning 2024 to 2025, was a time of technology giants. Players like Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN) directed billions of dollars into AI infrastructure, purchasing chips directly from Nvidia (NVDA). Their actions were largely driven by a desire to not miss out on the technological transition. The first AI wave was limited to a relatively narrow circle of participants.
In 2026, however, the second wave has begun. Numerous companies from the broader market have joined the process. From financial institutions to medical firms, the real sector is implementing AI technologies to optimize costs and increase efficiency.
The Dell and HPE Factor: Distribution of Demand
The picture becomes more complete if we compare this realization with the results of Dell (DELL) and Hewlett Packard Enterprise (HPE).
When a regional bank or a retail chain plans to implement AI, they rarely go directly to Nvidia for individual chips. Instead, these firms require system integrators. Companies like Dell or HPE use chips from the likes of Nvidia to assemble ready-made server solutions.
This is why, in Q1 2026, Dell and HPE recorded pronounced growth in AI server sales. These indicators grew by the triple digits year-over-year (YOY).
The combination of these factors — AI server revenue growth from Dell and HPE and the budget shifts of IBM’s clients — represents a reallocation of capital. Amid the second wave of AI, companies from outside the tech sector are supporting the current cycle in the semiconductor market.
What Does This Mean for Investors?
For investors, this shift shapes several reference points for the coming quarters.
First, chips and infrastructure solutions remain in demand. If demand is supported not only by the tech sector but also by the real economy, chip manufacturers like Nvidia, AMD (AMD), and Broadcom (AVGO), as well as memory makers like Micron (MU) and server assemblers, can count on stable orders.
Second, the enterprise software sector may face a temporary slowdown. Providers of traditional software (SaaS) will have to adapt to the new conditions. While corporations build out their AI infrastructure, standard software sales may stagnate.
Third, it makes sense for investors to look for prospects among companies of the traditional value sector. Representatives of the old economy — banks, retail, industry — that effectively implement purchased AI capacities may show improved margins.
IBM’s recent preliminary Q2 data confirms that AI is now moving beyond the scope of tech giants’ projects. AI technology is becoming part of the infrastructure for the entire economy, and financial flows are being redistributed accordingly.
On the date of publication, Mikhail Fedorov did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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