Chamath Palihapitiya said IBM’s stumble reflects a much larger problem facing the AI ​​industry: Companies that sell intelligence are making huge sums, but it’s not clear whether their customers can turn those costs into profits of their own.

“The downstream ecosystem also has to make money,” Palihapitiya said Tuesday when asked about Krishna’s letter on CNBC. “And then the end buyer of these tokens also has to make money.”

He stopped short of blaming IBM’s problems on its pivot to AI and cloud computing, and praised Krishna for repositioning the company.

Palihapitiya was less forgiving of IBM’s suggestion that rapidly evolving cybersecurity concerns distracted some clients during the quarter.

He said AI companies and their investors have repeatedly swung between extremes: describing the technology as an all-powerful breakthrough when raising money, then warning that it poses an existential threat when seeking regulation.

Bourne told Business Insider in an email that IBM suffered a “triple whammy.”

He said AI development is driving corporate spending toward hardware rather than software and services. At the same time, investors are punishing legacy companies that appear to be falling behind. Finally, native AI rivals such as Anthropic are putting additional pressure on traditional software business models.

“We can expect more quarters like this, but I think it’s a story of disruption, not necessarily extinction for legacy software companies,” he wrote. “Spending patterns will shift from the current focus and suppliers that adapt their products to the changing market will remain competitive.”

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“Direct recognition that customers have shifted AI capital spending toward core infrastructure: the question is how long the ‘re-prioritization’ lasts,” Basak wrote on Tuesday.

Mugalli wrote in X that he believes IBM is the first major casualty of a broader shift in business spending.

He argued that IBM’s failure shows the limits of corporate budgets. As hardware became scarcer and more expensive, executives prioritized servers, storage and memory over software deals that could be delayed.

“This is the SaaS reckoning coming exactly as it would,” Mugalli wrote, “not with cancellations, but with deprioritization.”

Mugalli predicted that IBM wouldn’t be the last enterprise software company to feel that pressure, pointing specifically to Palantir and ServiceNow.

Niles wrote in X that IBM’s warning was an example of the AI ​​”slowdown” he was expecting.

He also said clients redirected spending toward AI late in the quarter, cutting into IBM’s mainframe and related software business. He said much of that revenue is supposed to be recurring, making the shortfall more concerning.

“Given that software is a back-end loaded business, I doubt this will be the last victim,” he wrote.

In a note on Tuesday, Evercore ISI analysts led by Daryanani said IBM’s disappointing quarter was largely due to weaker-than-expected sales of mainframes and related software, rather than broad-based weakness.

They added that customers shifted IT spending toward servers, storage and memory amid supply constraints and cybersecurity concerns, while other companies, including Red Hat, remained resilient.