10 AI Stocks Analysts Are Watching

7. International Business Machines Corporation (NYSE:IBM)

Number of Hedge Fund Holders: 66

International Business Machines Corporation (NYSE:IBM) is one of the 10 AI Stocks Analysts Are Watching. On January 22, Stifel analyst David Grossman reiterated a Buy rating on the stock with a $325.00 price target. The firm sees IBM as a safe compounder benefiting from software-led growth, margin expansion potential, and even upside from its post-mainframe cycle anniversary.

According to the research firm, IBM is trading at a 40% premium to equal-weight S&P 500 multiple, broadly in line with its long-term average range of 20-55%, but above the pre-2025 trend of around 10-20%.

This re-rating is a reflection of several factors, including better software execution, margin improvement, defensive characteristics, and possibly the mainframe cycle effect.

Stifel anticipates organic software growth of around 7-8%, consistent with 2025 performance. Software acquisitions are also likely to provide organic growth tailwinds into 2027. Meanwhile, services fundamentals, which represent around 32% of revenue, are viewed as bottoming and showing signs of modest improvement.

The firm sees continued scope for margin expansion in years 2026/2027. Stifel noted that it is maintaining its 2026 estimates, which are broadly in line with consensus. The Confluent acquisition has not yet closed and therefore isn’t reflected in estimates, and is expected to be modestly dilutive.

We are maintaining our 2026 estimates (revenue +4%, cc margins +75bp, EPS +8%/$12.23, FCF +7%/$15bn), consensus largely in line. Confluent acquisition not closed or reflected in estimates, which we expect to be modestly dilutive to 2026/2027 EPS/FCF (known). We estimate stronger USD reduced 2026 f/x tailwind from 90bp to 40bp. We continue to recommend IBM for defensive minded investors.

International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products.