Shares of IBM suffered their steepest single-day fall in more than 25 years on Monday after fresh concerns surfaced around how AI could disrupt one of the company’s most entrenched businesses. The trigger came from AI startup Anthropic, which said its Claude Code tool is capable of understanding and modernising COBOL, a decades-old programming language that underpins many systems running on IBM’s mainframes.
Following this, IBM stock closed the session down 13.2 per cent at $223.35, which is its biggest daily drop since October 18, 2000. According to Reuters, the sell-off has dragged the stock down roughly 25 per cent so far this year, as investors reassess how quickly AI tools could alter the economics of enterprise software and IT services.
The market reaction followed a blog post from Anthropic claiming how Claude Code can automate large parts of COBOL modernisation, an area that has historically required long, consultant-heavy projects and generated steady revenue for IBM. The company argued that AI removes one of the biggest bottlenecks in updating legacy systems, which is simply understanding how they work.
“Hundreds of billions of lines of COBOL run in production every day, powering critical systems in finance, airlines, and government. Despite that, the number of people who understand it shrinks every year,” Anthropic wrote. “AI excels at streamlining the tasks that once made COBOL modernisation cost-prohibitive.”
What is COBOL and how is IBM connected to it? What Anthropic did to IBM?
COBOL, short for Common Business-Oriented Language, was created in the late 1950s and remains deeply embedded in global banking, insurance and government infrastructure. IBM has spent decades selling and supporting mainframe systems optimised for large-scale transaction processing, where COBOL continues to play a central role. Anthropic estimates that about 95 per cent of ATM transactions in the US still rely on the language, highlighting both its scale and its age.
Anthropic said Claude Code can analyse massive COBOL codebases by tracing dependencies across thousands of lines of code, generating documentation for workflows that are no longer clearly understood, and flagging risks that would otherwise take months of manual effort to uncover. “Legacy code modernisation stalled for years because understanding legacy code costs more than rewriting it. AI flips that equation,” the company said.
The startup added that what once required years of work can now be compressed into much shorter timelines. “With AI, teams can modernise their COBOL codebase in quarters instead of years,” Anthropic said, a claim that appears to have unsettled investors worried about how much of IBM’s services-led modernisation work could be automated away.
Anthropic vs IT companies: What is happening?
Monday’s sharp decline in IBM shares also shows a big change in market sentiment. Software and IT stocks have been under pressure for weeks as investors digest the rapid pace at which AI tools are moving from experimentation to real-world deployment. Anthropic’s recent launch of multiple Claude plug-ins, pitched as an application layer for automating complex software tasks, has added to fears that traditional consulting and integration work could face pricing and volume pressure.
The anxiety is not limited to US markets. Indian IT stocks have also come under strain amid questions about whether AI-led automation could reduce the need for large delivery teams. Some industry leaders, however, argue the concerns are misplaced. Wipro Chief Strategist and Technology Officer Hari Shetty recently said AI would likely expand the scope of work for IT services firms rather than shrink it. “When you look at the entire gamut of things that’s possible, it really appears like a large opportunity for us,” he said.
Others are a little worried. For instance, former Infosys CEO Vishal Sikka has warned that generative AI is already changing how enterprise projects are executed, according to CNBCTV18. “If you look at the application of generative AI to knowledge work, this disruption is real. It is here,” he said, pointing to sharp productivity gains in areas such as code migration and system integration.
