International Business Machines (IBM) experienced a significant stock decline on Monday, with shares falling nearly 13.2% by the close of trading. The sharp drop followed an announcement from artificial intelligence company Anthropic regarding a new capability that could disrupt a core part of IBM's long-standing business.
Anthropic revealed its Claude Code AI tool can now be used to modernize legacy systems running on COBOL, a programming language central to IBM's mainframe operations. This development has introduced new uncertainty for investors, highlighting the disruptive potential of advanced AI on established technology giants.
Key Takeaways
- IBM shares closed down nearly 13.2% on Monday, at $223.35 per share.
- The sell-off was triggered by AI company Anthropic's announcement about its Claude Code tool.
- Claude Code can automate the modernization of COBOL, a programming language critical to IBM's mainframe business.
- This event is part of a broader trend where AI advancements are causing significant volatility in the stock market.
The AI Catalyst for IBM's Decline
The market's reaction was swift following a blog post from Anthropic on Monday. The company detailed how its AI tool, Claude Code, can automate the complex process of updating systems that rely on COBOL, a key area for IBM's mainframe computer business.
IBM has historically been a dominant provider of mainframe systems, which are optimized for large-scale transaction processing in sectors like finance and retail. These systems often depend on COBOL code written decades ago.
Anthropic's technology aims to simplify what has traditionally been a costly and labor-intensive process. The AI can analyze and map dependencies across vast codebases, a task that would otherwise require months of human effort.
Understanding COBOL's Enduring Legacy
COBOL, an acronym for Common Business-Oriented Language, was developed in the late 1950s. Despite its age, it remains a cornerstone of the global financial system.
What is COBOL?
COBOL is a high-level programming language designed for business data processing. It excels at handling large volumes of transactions, making it ideal for systems in banking, government, and airline industries. Its reliability has kept it in use for over 60 years.
The language's prevalence is staggering. An estimated 95% of all ATM transactions in the United States rely on COBOL code. Billions of lines of this code are still active today, processing critical daily operations worldwide.
However, the pool of developers who understand this aging language is shrinking each year. This talent shortage has made modernizing these essential systems a significant challenge for many organizations.
“Hundreds of billions of lines of COBOL run in production every day, powering critical systems in finance, airlines, and government. Despite that, the number of people who understand it shrinks every year,” Anthropic stated in its announcement.
How AI Changes the Modernization Equation
For years, the high cost of analyzing and understanding legacy COBOL code has been a major barrier to modernization. Companies often found it was more expensive to figure out the old code than to rewrite it from scratch, leading to a standstill.
Anthropic claims its AI fundamentally alters this dynamic. By automating the initial exploration and analysis, Claude Code can drastically reduce the time and expense involved.
Anthropic's AI tool can map dependencies, document workflows, and identify risks in COBOL codebases, tasks that would typically take human analysts months to complete.
“AI excels at streamlining the tasks that once made COBOL modernization cost-prohibitive,” the company explained. This shift is part of a broader push to address what is known in the software industry as technical debt.
Technical debt refers to the long-term costs incurred when development teams choose easy, short-term solutions instead of better, more sustainable approaches. Legacy systems like those running on COBOL represent a massive accumulation of this debt.
A Wider Trend of AI-Driven Market Volatility
IBM is not the first company to see its market value impacted by the rapid advancements in artificial intelligence. The recent market environment has been characterized by a “sell first and ask questions later” mentality among investors reacting to AI news.
Just last Friday, a number of cybersecurity firms saw their stocks fall after Anthropic announced another new feature for Claude Code. That tool, called Claude Code Security, can scan code for security flaws and other vulnerabilities.
The pressure on the cybersecurity sector continued into Monday's trading session, alongside IBM's significant drop. These events show that investors are increasingly wary of how AI could disrupt established business models across the technology landscape.
Monday's sell-off pushed IBM's stock down more than 24% year-to-date, reflecting growing concerns about its position in an industry being reshaped by artificial intelligence.