IBM suffered its worst single-session decline on record, falling roughly 25% after a pre-announcement that revealed a $700 million revenue miss and adjusted earnings per share of $2.93, below the $3.01 consensus. The sell-off, discussed on Episode 810 of the podcast DH Unplugged hosted by John C. Dvorak and Andrew Horowitz, rattled markets and underscored a shift in enterprise spending toward AI infrastructure at the expense of traditional software.
According to management, customers are redirecting budgets toward AI servers, memory, and hardware, while delaying software purchases. The revenue miss and warning triggered a broad reassessment of Big Blue's near-term outlook. Notably, while IBM cratered, competitors Dell and Hewlett Packard Enterprise saw gains of 7% and nearly 5% respectively on the same day, reflecting a rotation rather than a sector-wide downturn.
Horowitz drew parallels to the 2007-2008 credit crisis, recounting anecdotes from a weekend gathering with commercial real estate developers and plumbers who described stalled projects and frozen loan draws. This "cradling" phenomenon, as Horowitz terms it, involves algorithmic rotation that props up indices even as individual stocks get hit. He noted that the S&P 500's best quarters since 1990 followed massive stimulus, and momentum historically carries into subsequent quarters.
The broader market context included blowout bank earnings from JPMorgan ($21B net revenue, 86% jump in equities), Bank of America ($9.1B net income), Goldman Sachs ($6.6B profit, $20.98 EPS), and Citigroup (net income up 45%). Meanwhile, SK Hynix's $26.5 billion NASDAQ ADR listing was oversubscribed seven times, and oil pushed toward $80 after President Trump walked back a proposed 20% Strait of Hormuz reimbursement fee.
On the AI front, the hosts examined Odysseus: The Fall, a 135-minute feature film produced for mid-five figures by FountainO, directed by Ash Kusha, and released alongside Christopher Nolan's $250 million Odyssey. The episode also covered Apple's lawsuit against OpenAI over alleged trade-secret theft involving former hardware chief Tang Tan and Chang Liu, with over 400 ex-Apple employees now at OpenAI.
The hosts' stock picks included Amazon and Micron, both long positions. The episode underscored the importance of understanding AI-driven spending shifts and the potential for further market dislocations as traditional tech companies adapt. The IBM plunge serves as a cautionary tale for investors navigating a landscape where AI investment is reshaping enterprise priorities.
