International Business Machines Corporation (NYSE:IBM) is another stock that Jim Cramer has been quite optimistic about. However, its shares are down by 23% year-to-date and by 12% over the past year. The primary reason behind the weak performance is International Business Machines Corporation (NYSE:IBM)’s preliminary second-quarter earnings report released on July 14th. The results saw the firm guide $17.2 billion in revenue and $2.93 in earnings per share. Both these figures missed analyst estimates of $17.86 billion and $3.01. Naturally, the crash, which saw the stock close 25% lower on the 14th, has now become central to International Business Machines Corporation (NYSE:IBM)’s debate. In his Monday appearance, Cramer mentioned the firm as being a disappointment after quantum computing briefly entered the discussion. Quantum computing is a major reason the CNBC TV host has been favorable for International Business Machines Corporation (NYSE:IBM) as he believes the firm to be one of the few established players in the industry:
“People like quantum. And I know that IBM fell. I know IBM being one of the grave disappointments so far this quarter.”
After the stock crash, the debate surrounding International Business Machines Corporation (NYSE:IBM) covers AI spending and its impact on the firm’s business. The primary concern, at least for the bears, is the impact of the AI wave on discretionary enterprise IT spending. This ties into broader worries about the software industry and the belief that generative AI is crowding out legacy software businesses such as International Business Machines Corporation (NYSE:IBM). As AI continues to rapidly evolve, the bears believe that discretionary spending has hit a pause until the technology landscape stabilizes.
However, the bulls argue that it might be premature to rule out the firm when it comes to AI. International Business Machines Corporation (NYSE:IBM) has several strong components in its AI portfolio. These include the watsonx, an AI and data platform that enables businesses to work with AI, machine learning and generative AI. The bulls also argue that International Business Machines Corporation (NYSE:IBM) has made key inroads in AI. One metric they cite for this belief is the firm’s generative AI book of business, which was worth $12.5 billion as of January 2026. Summing it up, the bulls and bears are split on whether the shift in software spending on AI carries long term risks for International Business Machines Corporation (NYSE:IBM).
What are the hedge funds thinking? Well, in the fourth quarter of 2025, 63 out of the 1,041 hedge funds part of Insider Monkey’s database were International Business Machines Corporation (NYSE:IBM)’s stakeholders. In Q1, this figure dipped to 59 out of 1,022 hedge funds. Other software firms, such as ServiceNow and Salesforce, had 108 and 101 hedge fund investors. Some notable exits in the first quarter included Tudor Investment Corp, while Millennium Management cut its stake by 54% to $31.6 million.
While we acknowledge the potential of IBM to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than IBM and that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
