New IBM AI Chips

IBM’s stock has surged 60% this year, signaling a major comeback for the century-old tech giant. Lets break down what’s going on.

Source: IBM

IBM Legacy

IBM’s history is a testament to technological ingenuity. Over a century old, the company was a pioneer in computing, introducing groundbreaking innovations like the hard disk drive and the first commercial mainframe computers.

In 1981, IBM launched its first personal computer (PC), which dominated the market with an 80% share, helping to bring computers into homes and small businesses. However, as PCs became commoditized and competition intensified, IBM pivoted away from the consumer-facing PC market, eventually selling its PC division to Lenovo in 2005.

This marked a critical turning point. IBM refocused on enterprise solutions, shifting its business model to software, consulting, and hybrid cloud services. Today, IBM thrives as a software-first company, innovating in AI and cloud infrastructure.

Innovations

IBM is pouring resources into research, consistently filing around 10,000 patents annually—an average of 25 to 30 per day. This relentless innovation has led to breakthroughs in semiconductor technology. In 2021, IBM introduced the world’s first 2nm silicon chip, ahead of competitors like TSMC and Intel. It has also pioneered advanced transistor designs, including nanosheet and vertical field-effect transistors (VFETs), developed in its Albany, NY facility.

Source: IBM

Recently IBM announced two new AI chips, the Telum 2 chip, designed for IBM’s upcoming Z17 mainframe, enabling advanced AI inference tasks. Complementing it is the Spyre AI accelerator, an ASIC (Application-Specific Integrated Circuit) optimized for matrix multiplication. Both chips, built on Samsung Foundry's 5nm process, are set to debut in 2025.

Source: IBM

These chips will strengthen IBM’s hybrid cloud offerings, which already handle 70% of the world’s financial transactions by value. IBM is also working to expand beyond inference, exploring hardware for training and fine-tuning AI models.

What’s Driving IBM’s Stock Surge?

IBM’s stock has seen an impressive 60% surge this year. But where is this growth coming from? IBM operates across four key business segments: Software, Consulting, Infrastructure, and Financing. Below I discuss how these divisions stack up.