Are IBM's Investments in Artificial Intelligence yielding fruitful results?
You might not typically associate IBM (IBM down by 3.37%) with being a top dog in the field of artificial intelligence (AI). Known for its early PC computers, business-critical mainframes, and extensive consulting services, IBM isn't usually the first name that comes to mind when discussing AI.
However, this perception is set to change soon. The company has been leading the AI race behind the scenes for quite some time now. IBM made a significant bet on this technology back in 2011, putting a substantial portion of its assets on the line for this technology. Now, as the rest of the tech industry is hopping on the AI bandwagon, IBM is poised for remarkable growth in the long term during the AI boom.
IBM's Lengthy Legacy of AI Innovation
IBM's AI prowess is undeniable. The company paved the way for machine-based thinking decades ago, when its Deep Blue chess computer defeated world champion Garry Kasparov in a six-game match. This groundbreaking achievement in 1997 underscored the power of supercomputers.
Fast forward to the present day, and modern human chess champions rely heavily on computers for their ultra-precise game analysis. Overpowering a cutting-edge chess engine playing at full strength in 2024 would be almost unthinkable.
IBM's pioneering research that led to this milestone started long ago. Do you remember the IBM "shoebox" system, which showcased elementary human voice recognition at the 1962 World's Fair?
IBM hasn't slowed down in its AI research. The company held approximately 3,000 AI patents in 2017, which increased to 7,300 four years later. When it comes to cutting-edge AI innovation, IBM outnumbers tech giants like Alphabet and Microsoft in the field of generative AI.
If you're looking for cutting-edge AI innovation, IBM should be your go-to source.
IBM's Focus on Enterprise-Friendly AI
Although IBM's AI contributions don't often make headlines, its business-oriented approach is noteworthy. The company prioritizes building enterprise-friendly systems focused on security, explainable data sources, and other business-centric features. While other companies may be captivated by consumer-focused AI gadgets, IBM focuses on delivering robust AI platforms for businesses.
The result? Secure, long-term contracts from business leaders who value these qualities. IBM took a strategic step back during the early AI boomdays, knowing that the increased public interest in AI would eventually lead to soaring demand for AI solutions. As today's consumer electronics, cars, and smart homes outgrow today's AI advancements, they will likely rely on IBM's tools and services.
IBM's AI Future is Closely Tied to Watsonx
IBM's foray into generative AI is proving to be a game-changer. Launched in the spring of 2023, Watsonx's generative AI platform amassed over $2 billion in multiyear subscription orders by the second quarter of 2024. By the end of the third quarter, the Watsonx orders had jumped to $3 billion.
The demand isn't just for the software; the majority of these orders are for consulting services, helping clients maximize value from Watsonx and other generative AI systems.
Yes, IBM has been an AI trailblazer. As AI boosts the company's financial performance for years to come, its enviable success story should eventually emerge from Wall Street's shadow. For now, IBM's reputable stock trades at a moderate 15.6 times free cash flow and 3.1 times sales. IBM could double in price without breaking a sweat and still be cheaper than other tech titans like Alphabet and Microsoft's steep valuation ratios.
To my mind, IBM is a compelling buy if you're seeking to invest in AI expertise at a budget-friendly price. The attention-grabbing headlines will arrive in due time. Give this century-old company some time to shine.
Investing in IBM's AI capabilities could prove to be a smart move due to its extensive history in AI innovation. With the success of Watsonx, IBM's generative AI platform, the company's financial performance is expected to boost significantly in the coming years.
Given IBM's robust enterprise-friendly AI platforms and cutting-edge research, it offers a cost-effective investment opportunity in AI expertise compared to tech giants like Alphabet and Microsoft.
