The market misjudged IBM(IBM.US)! Jefferies: The sharp decline ignored the key fact of "self-innovation"

This Monday, IBM (IBM.US) stock price plummeted, mainly due to news that Anthropic’s Claude Code product can translate COBOL language, sparking market concerns about this tech giant’s traditional business. However, Jefferies pointed out that this sell-off, which caused IBM’s largest single-day decline in 26 years, actually overlooks the key fact that IBM is undergoing self-reinvention.

Analyst Brent Thill wrote in a client report: “We believe the market’s concerns overlook a key point: IBM is actively pushing for self-reinvention. Its Watsonx Code Assistant for Z embeds generative AI directly into mainframes, helping to refactor COBOL into Java, and modernize applications within complete system environments. Importantly, the acceleration of IBM’s software business is not reliant on mainframes but benefits from the overall growth in hybrid cloud, AI, automation, and data sectors.”

Thill maintains a “Buy” rating on IBM with a target price of $370.

He added that Watsonx Code Assistant for Z, which has been commercially available for over two years, uses generative AI to refactor COBOL into Java, removing the burden of modernizing traditional mainframes. This tool can not only interpret production code and modernize applications but also preserve key operational logic.

“Embedding these capabilities directly into the Z platform gives IBM a structural advantage over horizontal code assistants—though powerful, they lack native access to mainframe data, tools, and runtime environments. Modernizing mainframes is far more than simple code conversion and documentation; it requires deep integration with operational resilience, performance tuning, and change management. IBM is a core player in these areas. From a broader perspective, IBM is building a multi-model, agent-based tech ecosystem through collaborations with providers like Anthropic and OpenAI. These AI agents will ultimately need to deeply integrate with enterprise data and hybrid cloud architectures, and IBM’s data layer, connectors, and platform integration capabilities give it a differentiated advantage in this field.”

Thill also pointed out that the resilience of mainframe business far exceeds most investors’ expectations. IBM previously disclosed that its mainframe business continues to grow, with 70% of clients expanding related workloads.

“Currently, about 73% of global transaction volume is still handled by mainframes, supporting mission-critical systems across industries. This fully demonstrates the platform’s deep roots and irreplaceability.”