IBM (IBM -1.58%) is regarded by some as one of the biggest busts in artificial intelligence (AI).
The legacy tech giant was early to the technology with its Deep Blue chess computer and Watson supercomputer, an early example of natural language processing. However, it was unable to adequately monetize those technologies, and it fell further behind the internet-based tech companies that now dominate the industry.
However, after a decade as a laggard on the stock market, IBM has found new life in the AI boom as investments under CEO Arvind Krishna in areas like the hybrid cloud and AI seem to be paying off, and the stock has doubled in the last two years. After several years of declining revenue in the 2010s, IBM has returned to growth with revenue up 8% in the second quarter, driving adjusted earnings per share up 15%.
AI is clearly playing a role in that growth as IBM's generative AI order book grew to $7.5 billion in the quarter, but now Big Blue is giving investors an even bigger reason to get excited about AI.
Image source: IBM.
IBM is teaming up with Anthropic
IBM has become the latest big tech company to partner with Anthropic, the AI start-up and creator of the Claude chatbot.
IBM said that Claude would be included in IBM's software portfolio and was expected to deliver productivity gains, build security, and make other improvements in software development.
The integration is now available to select IBM clients in early testing, and the company reported a productivity gain of 45% on average.
The move makes sense for both companies. For Anthropic, which is now valued at $183 billion, the partnership leverages IBM's deep corporate relationships and gets its product in front of more users, helping it drive faster adoption.
For IBM, tying its AI fortunes to Anthropic, one of the most highly regarded generative AI companies, will help it stay up to date with the latest AI advances and improve its reputation with its customers, who are counting on it for access to the latest AI models.
Is IBM a buy?
The AI boom has lifted nearly every tech stock, but IBM's gains have been mostly driven by expectations rather than results, and the stock is no longer cheap. The Anthropic deal could help accelerate its growth.
For now, IBM's gains seem warranted as profitability has improved, but I'd like to see the business accelerate before calling the stock a buy.
