Squeezed out of the core AI track? Wall Street bulls turn bearish, advising retail investors not to blindly "buy the dip" on IBM (IBM.US)

According to Zhitong Finance APP, IBM (IBM.US) just experienced a trading day that forces investors to re-examine the stock. The stock plunged 25.2% in a single day, wiping out tens of billions of dollars in market value and setting the worst single-day decline in recent company history.

This magnitude of a crash not only hurt all investors who bought near the top, but also forced the market to reassess IBM's true value. As a result, the overall tone of the market became even more serious.

Oppenheimer, which previously maintained a bullish stance on IBM, immediately downgraded the stock, further fueling the change in sentiment. This downgrade came hot on the heels of a selloff triggered by the financial results, turning a bad day into what may be a true turning point.

Therefore, a worrying question now hangs over this stock: Following IBM's sharp post-earnings decline and the subsequent downgrade by Oppenheimer, is this truly a warning sign that the company's growth story is starting to unravel?

IBM after the Plunge

IBM is a technology and consulting company with a market value of $205.9 billion, known for its work in hybrid cloud, enterprise software, and IT infrastructure. The stock has fallen 28.2% so far this year and is down 24.6% over the past 52 weeks.

IBM pays an annual forward dividend of $6.76 per share, equivalent to a yield of 3.20%. Its valuation is currently significantly below sector peers, with a rolling P/E ratio of 18.44x (sector median: 25.91x) and price-to-cash-flow ratio of 14.71x (sector median: 18.79x).

However, the more direct focus is the preliminary second-quarter 2026 results released on July 14—earlier than the full report and conference call planned for July 22. Revenue for the period was $17.2 billion, up just 1% year-over-year and well below the consensus estimate of nearly $17.9 billion. Non-GAAP EPS is expected to be $2.93 (up 5%), missing the consensus of about $3.01. Segment performance showed software revenue up 5%, consulting flat (up 1% at constant currency), and infrastructure down 7%.

CEO Arvind Krishna explained the shortfall to investors in a letter: In the final weeks of June, customers sharply reprioritized capital expenditures toward servers, storage, and memory, aiming to lock in constrained infrastructure supply before anticipated AI-driven price increases. IBM's balance sheet continues to expand. As of March 2026, total assets stand at $156.229 billion, up 2.86%, giving the company room to invest. Total liabilities reached $123.174 billion, up 3.39%. The increase in liabilities suggests debts and obligations are quietly mounting.

IBM’s All-New Suite of AI Tools May Still Be Critical

Even as IBM faces downgrades and a declining stock price, the company is rolling out some of its largest product updates in years. In mid-July, IBM launched its new Power Systems hardware and software aimed at handling large enterprise workloads.

The Power Autonomous Operations (Power Automated Operations) software is designed to discover and fix capacity issues as much as 15 times faster than manual checks. The lineup also features the entry-level, compact, AI-enabled edge computing Power S1112 server and a new Power Virtual Server option.

Beyond hardware, IBM has deepened its AI offering with the development of its AI platform, Bob. The advanced Bob suite introduces targeted modernization features for Java, IBM i, and IBM Z environments.

Trust and security have also been in the spotlight recently. In late May and early July, IBM and Red Hat expanded Project Lightwell—a $5 billion effort supported by over 20,000 engineers—to make open-source software safer for large organizations. The new Lightwell products aim to protect the software supply chain and create a stronger “trust infrastructure” as enterprises increasingly rely on open source in AI-intensive systems.

Collectively, these product initiatives show IBM is attempting to pivot toward AI, modernization, and security, rather than simply relying on legacy infrastructure.

Wall Street is Divided on IBM

Oppenheimer's rating trajectory on IBM largely illustrates how the growth narrative has changed. The firm previously rated IBM as “Outperform,” but that stance has now reversed.

Oppenheimer analysts downgraded the stock to “Perform,” removing their $350 price target entirely. Analyst Parham Singh, who led this move, emphasized that IBM's latest results missed both Oppenheimer’s and the broader market’s expectations in every business segment.

This downgrade lands as IBM approaches another key moment: the major earnings report set for after the U.S. market closes on July 22. Wall Street is looking for evidence of $3.02 EPS for the quarter ending June 2026. That would be up from $2.80 a year ago, reflecting a forecasted increase of 7.86%.

Oppenheimer is not alone in urging caution. Well-known analyst Jim Cramer has made it clear he does not recommend retail investors try to “buy the dip” in IBM just because the chart looks cheaper. In his eyes, IBM is on the wrong side of the major enterprise technology budget shift, as spending is increasingly directed toward AI-centric projects.

Even so, the broader analyst community hasn’t written off the company. Of the 22 analysts currently rating IBM, the consensus stands at a “Moderate Buy.” The average price target is around $293.95, implying 38.2% upside potential.