International Business Machines Corp. (NYSE: IBM | IBM Price Prediction) was the latest company, American or otherwise, to cut an artificial intelligence (AI) deal. This was a less-than-modest arrangement with Anthropic. It allows business customers access to Anthropic’s Claude AI model. The deal will enable IBM software to access an advanced AI tool. Many of IBM’s customers are large companies.
The deal stands out as less than mediocre when large tech companies and larger AI companies are cutting deals worth tens of billions of dollars. OpenAI and Nvidia have been forging partnerships across the tech world, with deals that rank among the largest in tech history.
The market does not regard IBM as a significant player in the new AI landscape. Its stock is up 36% this year. By contrast, Advanced Micro Devices Inc. (NASDAQ: AMD) is up 92% because of a partnership with OpenAI. Oracle Corp. (NYSE: ORCL) shares are up 72% in part due to a $300 billion deal that includes OpenAI to build out infrastructure.
IBM is still, and has been for years, too small to matter as a partner. This is reflected in its market cap, which is $270 billion. Oracle is valued at $882 billion, and AMD, which Nvidia dwarfs in the AI chip business, has a market capitalization of $383 billion.
IBM lost whatever clout it had decades ago. In 1980, IBM ranked ninth on the Fortune 500, America’s largest companies based on revenue. Since then, it has missed the opportunity to lead in personal computers, PC operating systems, e-commerce, tech operating systems, search, and, more recently, AI. It is hard to find a tech company that lost that many chances to be a leader.
Aside from a tiny market cap, it has tiny revenue. In the most recent quarter, the company reported revenue of $17 billion and net income of $2.2 billion. In its most recent quarter, the AI sector leader, Microsoft Corp. (NASDAQ: MSFT), had revenue of $76.6 billion and net income of $27.2 billion.
IBM is too small to play an important role in the future of AI.
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