Anthropic says cloud can understand COBOL, IBM stock suffers worst decline in 25 years
IBM shares saw their sharpest decline in 25 years after AI startup Anthropic said its cloud code tool could understand and modernize COBOL, a language deeply tied to IBM’s mainframe business. Here’s everything you need to know.
IBM shares suffered their biggest one-day drop in more than 25 years on Monday as fresh concerns emerged about how AI could disrupt one of the company’s strongest businesses. The trigger came from AI startup Anthropic, which said its cloud code tool is able to understand and modernize COBOL, the decades-old programming language that underpins many systems running on IBM mainframes.
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Subsequently, IBM stock closed the session down 13.2 percent at $223.35, its biggest daily decline since October 18, 2000. The selloff has pulled the stock down about 25 percent so far this year, according to Reuters, as investors lose confidence in how quickly AI tools can change the economics of enterprise software and IT services.
The market reaction came after a blog post from Anthropic boasted about how cloud code could automate large portions of COBOL modernization, an area that has historically required lengthy, consultant-heavy projects and generated stagnant revenue for IBM. The company argued that AI removes one of the biggest barriers to updating older systems, which is understanding how they work.
Anthropic wrote, “Hundreds of billions of lines of COBOL run in production every day, powering critical systems in finance, airlines, and government. Yet, the number of people who understand it is decreasing every year.” “AI excels at streamlining tasks that once made COBOL modernization cost-prohibitive.”
What is COBOL and how is IBM connected to it? What did Anthropic do with IBM?
COBOL, short for Common Business-Oriented Language, was created in the late 1950s and is deeply embedded in global banking, insurance, and government infrastructure. IBM has spent decades selling and supporting mainframe systems optimized for large-scale transaction processing, with COBOL playing a central role. Anthropic estimates that about 95 percent of ATM transactions in the US still rely on the language, highlighting both its scale and its age.
Anthropic said Cloud Code can analyze massive COBOL codebases by detecting dependencies on thousands of lines of code, generating documentation for workflows that are no longer clearly understood, and flagging risks that would otherwise require months of manual effort to uncover. “Modernizing legacy code has been held back for years because it costs more to understand legacy code than to rewrite it. AI changes that equation,” the company said.
The startup said work that once required years can now be compressed into much shorter timelines. Anthropic said, “With AI, teams can modernize their COBOL codebase in quarters rather than years,” a claim that has troubled investors worried about how much of IBM’s services-led modernization work can be automated.
Anthropic vs. IT Companies: What’s Going On?
Monday’s sharp decline in IBM shares also reflects a major change in market sentiment. Software and IT stocks have been under pressure for several weeks as investors recognize the rapid pace at which AI tools are moving from experimentation to real-world deployment. The recent launch of Anthropic, offered as an application layer to automate complex software tasks, has raised fears that traditional consulting and integration work may face pricing and volume pressures.
Concerns are not limited to US markets. Indian IT stocks have also come under stress amid questions over whether AI-led automation could reduce the need for large delivery teams. However, some industry leaders argue that the concerns are misplaced. Hari Shetty, chief strategist and technology officer at Wipro, recently said that AI will likely expand rather than reduce the scope of work for IT services companies. “When you look at the full scope of possible things, it really seems like a big opportunity for us,” he said.
The rest are a little worried. For example, according to CNBCTV18, former Infosys CEO Vishal Sikka has warned that generic AI is already changing the way enterprise projects are executed. “If you look at the application of generative AI to knowledge work, the disruption is real. It’s right here,” he said, pointing to sharp productivity gains in areas like code migration and systems integration.
