International Business Machines Corp. shares plummeted dramatically on Monday, marking one of the most significant declines in the company's recent history. The selloff was triggered by artificial intelligence startup Anthropic's announcement that its Claude Code tool can assist with modernizing COBOL, a decades-old programming language that remains heavily dependent on IBM's mainframe computers.
Market Reaction and Historical Context
IBM shares sank as much as 13 percent during trading, representing the largest intraday drop since March 2020. This decline has pushed the stock down 26 percent for February alone, putting it on track for its worst monthly percentage decline since at least 1968, according to Bloomberg data. The selloff reflects growing investor anxiety about how artificial intelligence technologies might disrupt established technology companies with legacy business models.
Anthropic's Disruptive Announcement
In a detailed blog post, Anthropic explained that "tools like Claude Code can automate the exploration and analysis phases that consume most of the effort in COBOL modernization." This represents a significant shift from traditional approaches where "modernizing a COBOL system once required armies of consultants spending years mapping workflows."
The announcement comes just days after Anthropic introduced new security features into its Claude AI model, which had already spurred widespread selling in cybersecurity stocks. This pattern suggests a broader market concern about AI's potential to disrupt multiple technology sectors simultaneously.
IBM's Mainframe Vulnerability
A substantial portion of IBM's business remains tied to its mainframe operations. These massive customer-owned servers predominantly run applications on COBOL, an older coding language that contrasts sharply with more modern programming languages prevalent elsewhere in the technology industry. Mainframes are particularly common among organizations with critical reliability requirements, including financial institutions and government agencies.
Most mainframe computers that operate COBOL are manufactured by IBM, making the company uniquely vulnerable to any technological shifts that reduce dependence on this legacy infrastructure. The recent selloff positions IBM as the latest established company to experience heavy selling pressure driven by fears that artificial intelligence will negatively impact the growth prospects of legacy technology providers.
Broader Market Implications
Software stocks have been broadly weaker throughout the year amid mounting concerns about AI-related disruption. A major software exchange-traded fund has declined 27 percent this year and appears headed for its largest quarterly drop since the 2008 financial crisis.
Much of this selling pressure stems from new AI tools released by companies including Anthropic, OpenAI, and Alphabet Inc. Investors are increasingly concerned that the ability to "vibe code"—using artificial intelligence to write software code—will enable users to create their own applications more easily. This capability could potentially diminish demand for legacy software products, thereby weighing on established companies' growth trajectories, profit margins, and pricing power in the marketplace.
The situation highlights how rapidly evolving artificial intelligence technologies are creating new competitive dynamics across the technology sector, with established players like IBM facing unprecedented challenges from agile startups offering innovative solutions to longstanding technological problems.
