IBM's stock performance and the broader assessment of artificial intelligence-related risk for the company came under renewed scrutiny after Anthropic released its Claude Code tool, Morgan Stanley said in a client note.
Analyst Erik Woodring highlighted that the market reaction to the tool's launch produced what he described as IBM's worst trading day since 2000. That move contributed to a decline in the shares of more than 20% over the previous month, according to the note.
In response to the recent turmoil and pronounced volatility across peers, Morgan Stanley reduced its price target for IBM to $247 from $304. The firm emphasized that the episode has pushed AI disruption risk into conversations about IBM after the shares had been relatively insulated from the multiple compression affecting software and services earlier in the year.
At the center of the debate is whether generative AI tools such as Claude Code present a meaningful threat to the mainframe - a platform IBM still maintains as a core element of many large enterprises' infrastructure. Morgan Stanley urged caution in framing the issue as binary, distinguishing between the availability of tools that could enable modernization off the mainframe and an enterprise's willingness or desire to pursue such migration.
The bank noted that Claude Code might lower friction around COBOL modernization by making it easier, faster and less costly. At the same time, it underscored the mainframe's role as the backbone for the world's largest enterprises, calling out systems that run banking operations, payments, airline reservations and government platforms.
Morgan Stanley also argued the mainframe delivers reliability, throughput, security and cost characteristics that are not straightforward to replicate elsewhere. The firm further suggested that mainframes may be capable of supporting "massively complex AI workloads," a point that complicates simple narratives of displacement.
Nonetheless, Morgan Stanley said the risk is nuanced. Smaller firms could move off mainframes entirely, and larger organizations might pursue partial migrations. That mix of potential outcomes contributes to heightened uncertainty and is likely to sustain elevated volatility in the shares.
According to the bank, IBM stock may not establish a clear bottom until investors observe specific upside catalysts. Among those potential catalysts Morgan Stanley listed were sustained software revenue growth, unexpected improvements in free cash flow, or a major breakthrough in quantum computing.
Should you be buying IBM right now? ProPicks AI evaluates IBM alongside thousands of companies each month using more than 100 financial metrics. The tool aims to identify stocks with attractive risk-reward profiles based on current data and has highlighted prior winners including Super Micro Computer (+185%) and AppLovin (+157%).