IBM shares fell 11% on Tuesday after investors learned that Anthropic's new AI coding tool, Claude Code, could eat into the company's lucrative COBOL-related consulting business. The drop erased billions in market value and signaled growing unease about the vulnerability of traditional IT services to generative AI.
Why the market reacted
IBM has long relied on its mainframe and legacy systems business, particularly COBOL programming services, for steady revenue. Many large banks, insurers, and government agencies still run critical applications written in COBOL, and IBM has been a primary provider of maintenance and modernization. Anthropic's Claude Code, an AI assistant designed to understand and generate code in multiple languages including COBOL, threatens to automate tasks that previously required expensive human consultants.
What Claude Code does
Claude Code is a coding tool built on Anthropic's large language model. It can read, explain, and generate COBOL code, potentially allowing companies to modernize their legacy systems without hiring armies of COBOL programmers. This directly challenges IBM's consulting model, which has historically charged high rates for COBOL expertise.
IBM's consulting model under pressure
IBM's traditional consulting model is considered vulnerable to AI advancements. The company has been trying to pivot toward cloud computing and AI services, but its legacy business still accounts for a significant portion of revenue. The 11% stock drop suggests that investors see Claude Code as a concrete threat, not just a theoretical one.
Anthropic, a San Francisco-based AI startup, has positioned Claude Code as a tool for developers to accelerate coding tasks. The company has not specifically targeted IBM, but the market's reaction shows how quickly AI can disrupt established business lines.
IBM has not yet commented on the stock decline or on Claude Code. The company's next earnings call is scheduled for next month, where analysts are expected to press executives on their AI strategy and how they plan to defend the COBOL business.
