IBM shares experienced a historic 13.2% collapse on February 23, 2026, marking the steepest single-day decline for the technology giant since the year 2000. The sell-off erased approximately $31 billion in market capitalization in a single session, triggered by fears that rapid advancements in artificial intelligence are poised to dismantle the company’s high-margin legacy business. The primary catalyst for the crash was an announcement from AI startup Anthropic regarding its "Claude Code" tool. This platform claims the ability to automate the modernization of COBOL, the 60-year-old programming language that powers 95% of U.S. ATM transactions and 80% of in-person credit card swipes. Historically, updating these systems required massive teams of IBM consultants and years of manual labor. Anthropic suggests AI can now compress these multi-year projects into mere quarters. Market sentiment shifted instantly from viewing AI as a growth catalyst to recognizing it as a structural threat to traditional service models. Investors are concerned that if AI automates code analysis and migration, IBM’s lucrative consulting and mainframe maintenance revenue will face significant margin compression. The ripple effect was felt globally, dragging down major Indian IT firms by as much as 8% as the industry reassesses the value of labor-heavy outsourcing. Despite the volatility, IBM’s underlying fundamentals remain resilient. The company recently reported Q4 2025 revenue of $19.7 billion, a 12% year-over-year increase that exceeded analyst expectations. Its generative AI book of business has surged to over $12.5 billion, and infrastructure revenue grew by 21%, driven by strong adoption of the z17 mainframe cycle. CEO Arvind Krishna has labeled the stock’s plunge an "overreaction," citing $4.5 billion in internal productivity gains already achieved through AI. Analysts remain divided on the long-term impact. While some see a tactical entry point with a consensus price target of $314, others warn that the "moat" around legacy systems is thinning. IBM expects to generate more than 5% revenue growth and an additional $1 billion in free cash flow throughout 2026, relying on its watsonx platform to transition from a defender of legacy code to a leader in enterprise AI governance. The current market environment reflects a "tug-of-war" between structural bears and value-oriented bulls. With the stock down nearly 22% year-to-date, the focus has shifted to how quickly highly regulated sectors like banking and government will actually adopt unproven AI tools for mission-critical infrastructure. For now, the narrative of "efficiency gains" equaling "profit compression" dominates the ticker.