Does anyone care about IBM anymore?

Welcome to AI Collision 💥,

In today’s collision between AI and our world:

• An AI pioneer left behind?
• Is the future in quantum?
• Selfies with System One

If that’s enough to get the computer winning in chess and Jeopardy!, read on…

AI Collision 💥

There’s a pretty good argument that suggests without IBM (IBM) none of the world we live in today would be so advanced. That the rise of AI doesn’t happen without the storied history of IBM and the most basic of tabulating machines, the punch card.

Founded in 1911, the Computing-Tabulating-Recording Company was an industry leader in tabulating machines. And in 1914 Thomas J. Watson was put in charge of the company – his focus and vision was on the information and technology side of the business as he believed that’s what would drive the world and the company to greatness.

Watson renamed the company International Business Machines (IBM) in 1924 and would stay CEO of the company for 42 years in total. He would be instrumental in pointing the company toward the early beginnings of the modern computer, overseeing the introduction of the IBM 701 (the Defense Calculator) in 1953 before handing over the full reins of the company to his son, Thomas J. Watson Jr in 1956.

IBM would come to be the computing giant of the world. That accelerated in 1981 when it introduced the IBM 5150 Personal Computer. It was the first real consumer-grade PC that allowed people to connect to a television, process text and play games.

While always known as a computer company, it’s its long-standing history in artificial intelligence that’s critical to where IBM is at today and where it heads in the future.

Before it released the 5150, IBM created a machine simply known as “Shoebox” which was released at the 1962 World’s Fair. This was the world’s first speech recognition system. It had come about from IBM researchers helping their machines to “learn”. They did this by playing checkers and chess, enabling the computer systems to learn more effective strategy through trial and error.

According to IBM, “One IBM researcher of note, Arthur Samuel, called this process “machine learning,” a term he coined that remains central to AI today.”

By the late 90s IBM had been so heavily invested in AI that it released a computer known as “Deep Blue”. It would go on to become the famous computer of the 20th century.

Deep Blue lives in the Smithsonian now, but it defeated Grand Chess Master Garry Kasparov in 1997. Deep Blue’s successor, “Watson”, was IBM’s next iteration of AI. And in 2011 it would compete on the game show Jeopardy! which was notoriously difficult for machines to understand due to the required answers for the game show being the question to an answer given.

But it wasn’t until 2023 that IBM released “Watsonx” and an AI data platform to which organisations could “plug into”.

But for all its long-standing history in computing and AI research, IBM hasn’t really leapt to the forefront of investors’ minds when looking at market opportunities for investing in AI.

That’s not to say IBM has struggled. It’s a $241 billion giant, that’s also profitable, pays a small dividend and has returned 38% in the last year.

However, it took IBM the better part of 11 years to trade above stock price highs from 2013. It’s only been in the last six months that it’s beaten that previous all-time high from early 2013.

That rise, however, hasn’t really been due to its AI chops.

In fact, I’d suggest that if you’re looking for an out and out AI play, IBM isn’t and shouldn’t be your first port of call.

I believe there is life in this old dog yet, but it’s not an AI opportunity, it’s quantum computing.

That’s been the driver of its latest surge. Only about three weeks ago, in the company’s Q4 earnings announcement, the company explained how it had booked cumulative revenues from its quantum business.

Admittedly, that’s over several years now, but when the company was once the market leader in tabulating machines, then personal computers, it looks like its next potential market leadership might come from quantum systems.

IBM says it has over 80 quantum systems deployed globally, more than the rest of the world combined.

IBM has been developing its quantum systems for years. Back in 2020 at CES in Las Vegas I even took a selfie with its then most advanced quantum system, the IBM Q System One.

IBM is now onto the IBM Q System Two using IBM Quantum Heron processors, which it has designed and built itself.

My take is that in the coming years, we’ll come to learn just how critical quantum computing will be to the future of AI. As that realisation comes into play, IBM might once again be as revered as it was in the 20th century.

While not be an outright AI play right now, when you look at IBM as a quantum play, it’s still got a lot of life left in it yet.

#AD

DeepSeek sparks AI sell-off – but the smart money is buying

When DeepSeek launched, AI stocks tumbled, with Nvidia plunging 17% and the Nasdaq dropping 3.4%. But here’s what most investors don’t realise – this isn’t bad for AI, it’s a catalyst for the next wave of growth.

DeepSeek’s advancements will actually help the biggest AI players scale more efficiently, and could create a massive buying opportunity in key stocks. I’ve been ahead of this trend, and now, the stocks I’ve been watching are at a rare discount.

Capital at risk.

Boomers & Busters 💰

AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).

Boom 📈

• Brainchip (ASX:BRN) up 3%
• Apple (NASDAQ:AAPL) up 1%
• Appen (ASX:APX) up 0.7%

Bust 📉

• Palantir (NASDAQ:PLTR) down 29%
• iRobot (NASDAQ:IRBT) down 29%
• Intel (NASDAQ:INTC) down 16%

From the hive mind 🧠

• More evidence that implementing AI into health and medicine can lead to better outcomes for patients and ultimately lead to less stress on healthcare service.
• Alibaba is betting big on AI. It’s going to put its money where its mouth is, committing $53 billion on levelling up its AI infrastructure.
• I am looking forward to the day when I can reliably ask AI to find me the best flight from A to B, book me the hotel to suit my preferences and budget, and to organise all the little things like transfers, transport passes and anything else to prepare for a trip. I don’t think we’re there yet, but there’s a few options out there now that might suggest we’re close.

Artificial Polltelligence 🗳️

Weirdest AI image of the day

A newton is a measure of force. A newt ton is a lot of amphibians. A Fig Newton is fruit and cake.

ChatGPT’s random quote of the day

Thanks for reading, and don’t forget to leave comments and questions below,

Sam Volkering

Editor-in-Chief

AI Collision