AI Spending Shift Puts Pressure on Tech Stocks
Three tech stocks, IBM (IBM), Oracle (ORCL), and NuScale Power (SMR), dropped to their lowest levels in a year on Thursday, sparking concerns over whether heavy investments in artificial intelligence infrastructure will deliver sufficient financial returns.
The shares of IBM fell after the company acknowledged that it failed to adapt quickly enough to shifting customer demand. IBM's announcement that enterprise customers are prioritizing AI infrastructure investments at the expense of traditional software offerings added pressure.
Analyst Jim Kelleher of Argus reduced his price target on IBM shares to $280 from $360, while reaffirming a 'Buy' rating, following IBM's negative pre-announcement for its fiscal second-quarter results. The firm noted that IBM underestimated the impact of rising component costs on customer spending patterns.
Oracle stock tumbled to a 52-week low as investors remained concerned about the company's aggressive investments in Oracle Cloud Infrastructure, which have resulted in elevated capital expenditures and negative free cash flow.