As a friend of mine said, the AI Panic has officially reached its silly season. International Business Machines Corporation (IBM) lost 13.2% on the first day of the trading week in the wake of news from Anthropic about an AI-driven tool to modernize COBOL code for IBM mainframes. According to Yahoo Finance, IBM last lost this much on a percentage basis in October, 2020. IBM is also on track for its worst monthly percentage loss since 1968. Anthropic’s Code Modernization Playbook has the following to say about COBOL modernization:
“Technical leaders managing legacy systems know the pain: escalating maintenance costs, scarce COBOL talent, and teams trapped in endless bug fixes. The Code Modernization Playbook… [will] highlight how agentic coding can analyze complex codebases, generate test suites, and preserve business logic during migrations”.
While this tool may be useful, IBM has its own generative AI methodology for modernizing COBOL to java using its WatsonX coding assistant. Yahoo Finance indicated this tool debuted in 2023 and other companies have their own such tools.
During the company’s Q2 2025 earnings conference call, CEO Arvind Krishna claimed that this tool was popular with customers:
“The watsonx Code Assistant on Z, which helps people modernize their mainframe environment, helps you understand, and if you want, translate your COBOL code into Java, is really taken up and has got very wide adoption. We thought people would use it to just modernize COBOL to Java. But actually, in the vast majority of the cases, people are also using it to understand the tens of millions of lines of code that they have and then decide what makes sense to modernize versus what makes sense to keep now that you can document it and know what it does.”
Anthropic is apparently entering a well-served space. The market panicked as if IBM never thought about using AI to update and upgrade its code…or that the company will stand idly by and watch its mainframe business blow up (of course, a collapse of the mainframe business is a non-zero possibility given the speed of AI developments).
The Trade
I am assuming cooler heads will prevail by Tuesday’s open. However, I doubt Monday’s full loss will reverse. Thus, I intend to buy shares with a first profit target for a full reversal of Monday’s loss. If IBM actually sells off further after Tuesday’s open, then I am selling a put option with a target strike around $200.
The AI Panic has spread so far and wide that it is not possible to chase every opportunity with good risk management. Thus, I am being selective and strategic. While I did not anticipate adding IBM to the shopping list for 2026, this 24.1% year-to-date loss qualifies the stock for inclusion while the business has changed little (IBM last topped out after a 5.1% post-earnings gain on January 29).
Be careful out there!
Full disclosure: no position
I took profits today. A three-day rebound is a classic oversold bounce. I am buy the dips from here…$223 is my stop-loss for all future investments/trades.