This isn’t your great-grandfather’s IBM (NYSE: IBM) anymore. It’s still a great long-term investment, though.
IBM’s pioneering history
The former maker of punch-card calculators evolved into an industrial computing powerhouse, a personal computing innovator, and then an all-you-can-eat buffet of information technology products. And just when everyone else started to copy Big Blue’s successful business model, the company took a sharp turn into cloud computing, consulting services, data security, and artificial intelligence (AI).
It was a tough business transformation, but it’s starting to pay off for longtime investors. About ten painful years after the newfound focus on AI and cloud services, ChatGPT came along to launch a marketwide fascination with AI.
Most investors didn’t see IBM as a player in that explosive market at first, because it wasn’t launching splashy consumer-facing AI apps or showing skyrocketing sales growth.
Image source: Getty Images.
How IBM captures corporate clients in the AI boom
IBM aims squarely for enterprise-class corporate customers. Other companies can chase consumers all they want, but this company always wants long-term contracts with deep-pocketed clients.
These deals take time, since the potential clients in this class often have to go through many layers of management approvals and technical testing. For that reason, it wasn’t surprising to see other tech giants sprinting ahead of IBM in the AI boom’s early days.
But the approvals have started to come in and IBM is recording robust sales in the AI market. The watsonx generative AI platform has only been around for one year but already has more than $2 billion of signed contracts.
The watsonx service includes the same large language model (LLM) technology as OpenAI’s ChatGPT or Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Gemini, but it’s paired with a large array of machine learning tools. The resulting AI system combines IBM’s decades of market-leading machine learning research with the user-friendly flexibility of LLMs, and the whole bundle connects to the client’s proprietary business…
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