Is International Business Machines Corp. a Buy?
Although it may seem counter-intuitive, International Business Machines Corp. (NYSE:IBM) could be one of the biggest winners on the stock market this year. We have this confidence in IBM stock despite a whole host of problems—19 straight quarters of declining revenues, increased competition, and an uncertain future—because none of them matter. Here’s why.
IBM is a leading player in a tech trend that could dwarf all others: artificial intelligence. This is an opportunity to make a ton of money, if you know how to play it right. IBM stock could be a one-way ticket to riches, because investment in AI is surging right now.
According to Infosys Ltd ADR (NYSE:INFY), roughly 85% of corporate executives plan to invest in AI technology. There are going to be hundreds of billions of dollars thrown around this industry. Dear reader, this money is going to end up in someone’s pockets. I’d rather it were in yours. (Source: “Amplifying Human Potential,” Infosys, last accessed January 23, 2017.)
IBM stock is an amazing way to play this tech trend. Not only does this company sell to businesses (which makes it more stable), but it also has a long history with artificial intelligence.
Some readers may remember when IBM’s “Deep Blue” checkmated the world chess champion, Garry Kasparov. That was back in 1997, ancient history to some, but a harbinger of AI for those who were paying attention.
Then IBM’s “Watson” won Jeopardy! over and over again. Now we’ve gotten to the point where artificial intelligence programs can win at poker. This means AI tech is capable of reading people’s expressions, noticing when they are bluffing, and calculating the odds of winning.
In other words, it is getting smarter than us.
If your first instinct is to panic, don’t. We’ve all seen science fiction movies where an omniscient artificial intelligence takes over the planet. Relax…that’s the least of our worries. People are far more concerned that AI robots will replace human workers, thus driving up unemployment.
But IBM’s CEO, Ginni Rometty, thinks those fears are overblown as well. At the World Economic Forum in Davos, Switzerland, she reiterated that IBM will provide “a partnership between man and machine.” (Source: “IBM CEO: Jobs of the future won’t be blue or white collar, they’ll be ‘new collar’,” CNBC, January 17, 2017.)
“Think more about activities changing with the technologies. When you do your job, there will be things that take you a lot of time to research and do,” she said. “Yes, they’ll be done faster. Then you have the time to do what I think we all humans do best.”
Rometty also revealed that IBM will hire 25,000 new workers in the next four years, starting with 6,000 in 2017. This is a positive sign for the company. It shows that it plans to conquer the coming AI market and provide shareholders with enormous gains along the way. (Source: “IBM Still Hopeful After 19 Consecutive Quarters Of Declining Revenue,” Fortune, January 19, 2017.)
It will be relatively easy for IBM to crush smaller rivals, particularly because of its deep roots in the corporate IT world. It has plenty of deep relationships. More to the point, IBM is cash-rich. It manages to churn out $4.5 billion in profit each quarter regardless of the headwinds I listed at the start of the article. So keep an eye on IBM stock, because it could surge in 2017.