IBM (NYSE: IBM) gained attention on March 24, 2025, as Wedbush Securities added the tech giant to its "Best Ideas List." In the wake of this announcement, IBM shares rose by 1.3% in premarket trading.
The decision from Wedbush comes amidst a significant bullish outlook on the future of artificial intelligence (AI) in enterprise settings. In a research note, analysts at Wedbush indicated that AI is poised to drive a staggering $4.4 trillion in annual productivity gains by 2030. This projection hinges on the belief that IBM is well-positioned to benefit from the ongoing demand shift for hybrid and AI applications. As more enterprises seek to integrate AI into their operations for increased efficiency, IBM's stock has been rallying in response.
"With AI expected to drive $4.4 trillion in annual productivity gains by 2030, we believe that IBM is well-positioned to capitalize on the current demand shift for hybrid and AI applications as more enterprises look to implement AI to drive efficiencies across operations," according to Wedbush Securities. This statement reflects an optimistic stance of the firm towards IBM's future performance.
IBM's stock has shown remarkable resilience this year, with an 11% increase year-to-date, standing in contrast to the S&P 500's decline of 4.8%. In comparison to the previous year, IBM witnessed a dramatic upward trend as shares rallied over 35%, attracting renewed confidence from Wall Street regarding its prospects in the AI sector. The recent rise marks a return to record highs for IBM's shares, something not witnessed in a decade.
However, the preceding weeks have not been entirely smooth for IBM. Following a warning from technology consulting rival Accenture (ACN) hinting at potential downturns in government business due to federal spending cuts under the Trump administration, IBM's stock took a hit. Specifically, shares fell below their 50-day moving average when they dropped 3.5% last Thursday, leading to concerns about the impact on IBM's consulting segment.
Despite this setback, early trading activity indicated a possibility for IBM to regain its footing. Analysts noted that Wednesday marked an upturn in IBM's stock price, reflecting optimism in the sector.
Daniel Ives, managing director at Wedbush Securities and known as a "perma-bull," emphasized that spending on AI is climbing even amid market volatility. He mentioned that his firm's research shows AI budgets now comprise around 12% of many IT budgets, with some companies even positioning up to 15%. This marks a notable increase from his prior estimate of 10% made in January.
"So far about 70% of customers we have spoken with heading down the AI path have accelerated their AI budget dollars and initiatives over the last six months, speaking to the sheer speed of this tech spending cycle," Ives noted. This data encompasses various industries, including financial services, healthcare, transportation, and logistics, all of which point to robust demand for AI-related investment.
Notably, Ives has also included IBM on the Wedbush Best Ideas List, solidifying his growing confidence in the tech giant's ability to leverage its installed base effectively in the upcoming periods. He wrote, “The clear standout over the last month from checks has been the cloud penetration success at IBM, which has a massive opportunity to monetize its installed base over the next 12 to 18 months.” This sentiment underlines the optimism surrounding IBM as it navigates through evolving market dynamics.
While most analysts maintain a positive outlook, J.P. Morgan's Brian Essex urges caution. He reiterated a neutral rating on IBM stock, suggesting potential disruptions to procurement processes driven by aggressive federal budget cuts initiated by the Trump administration could adversely affect the company. It’s noteworthy that federal spending constitutes less than 5% of IBM's overall revenue, and thus, the anticipated government-related challenges may have limited immediate implications for the company.
As IBM continues to adapt to shifting market trends and bolstered AI investment, the tech landscape appears to be evolving rapidly. The prospect of AI remains increasingly pivotal for numerous companies, and industry experts are closely watching how these trends unfold.
