What went wrong at IBM

Certain patterns are more predictable than others. The solar system’s daily cycle — morning, evening, night — is almost guaranteed to persist. Similarly, the cycle of existence itself — birth…life…death — continues unceasingly.

We’ve also noticed that wars follow their own timing, with clear starts and conclusions. But once a conflict begins, it unleashes chaos without knowing what might emerge.

Today, however, we find ourselves following the ups and downs of the investment realm — navigating the fierce challenges lurking in its shadows.

Take IBM, for instance—a company with a storied legacy. My Investing News reports:

Picture a retiree who accumulated IBM shares over 30 years and treated them as the quiet, dependable corner of a taxable portfolio. The reasoning seemed solid: IBM is a Dividend Aristocrat, raised its quarterly payout for a 31st consecutive year in April 2026, and has paid uninterrupted quarterly dividends since 1916. Yet the reliability of the payout did not make the stock price stable. IBM shares plunged 25.2% on July 14 after a rare warning about preliminary second-quarter results. For retirees, the lesson is not that IBM suddenly became worthless. It is that even a celebrated blue chip can become a dangerous retirement anchor when one company occupies too much of the plan.

What caused IBM’s troubles? According to Forbes:

The historic decline followed a letter from Krishna to IBM investors on Tuesday, in which Krishna said about the company’s “disappointing” second-quarter performance: “What played out was worse than our expectations. We did not adapt and move quickly enough.”

And just like that, nearly $70 billion evaporated.

Such swings are part of the market’s rhythm. One moment the value appears, and the next moment it vanishes.

This vanishing-value scenario is widespread across the tech sector. Ultimately, cash is what counts — you either possess it or you don’t. Google, for example, is generating unprecedented amounts — $112 billion in the last quarter — yet its stock price keeps falling.

Why is that?

Because it’s burning through cash. Its most recent report revealed a $6 billion negative free cash flow. The losses were ‘invested’ in AI infrastructure.

Tesla faces a similar narrative. Its shares dropped 15% after announcing a cash loss of $1.1 billion, with funds (largely from car sales) being funneled into AI infrastructure as well.

When money flows out rapidly, investors tend to flee. Charlie Bilello offers this insight:

Apple has generated $129 billion in free cash flow over the past year while Oracle has burned $24 billion.

Their stocks have followed the fundamentals: Apple is up 56% over the past year, trading at an all-time high. Oracle is down 52% over the past year, trading at a multi-year low.

Investors are starting to draw a line on AI spending.

Apple’s discipline is being rewarded. Oracle’s overspending is being punished.

SpaceX occupies a unique position but still moves along familiar trajectories — surges followed by declines. Its performance sheds light on broader trends. Part of Google’s remarkable Q2 earnings stemmed from recognizing a $99 billion increase in the value of its AI stakes, especially in Anthropic and SpaceX. Note that Anthropic remains private.

However, since peaking on June 16th, SpaceX’s valuation has halved — wiping out approximately $1.5 trillion. Some of this loss will appear in Google’s upcoming quarterly statement, where it will have to account for a portion of its capital expenditures as ‘depreciation,’ reflecting the drop in investment value.

Later this year, on December 9th, most of the selling restrictions will expire. Following that, a wave of selling — from employees both junior and senior — is expected to hit SpaceX hard.

Brace yourselves.

Editor’s note: Find more of Bill’s writing at Bonner Private Research.