IBM CEO Arvind Krishna speaks at an IBM facility in Poughkeepsie, New York, on Oct. 6, 2022. IBM announced $20 billion in investments during President Biden’s visit that will go toward research and development and the manufacturing of semiconductors, mainframe technology, artificial intelligence and quantum computing in the Hudson Valley.
Dana Ullman | Bloomberg | Getty Images
IBM isn’t often described as a hot company. But in a year that saw investors abandon all major tech stocks, Big Blue was in the green.
The Nasdaq is closing out its worst year since 2008. High gas prices, soaring inflation and the Federal Reserve’s steady pace of rate increases have punished growth stocks and favored more mature, less volatile names that are viewed as more recession-resistant.
Tech names that thrived during the Covid days suffered the most as the economy reopened and consumers returned to many of their old habits.
Among U.S. tech companies valued at $50 billion or more, IBM was one of only two to generate positive returns in 2022. As of Friday’s close, the stock was up 6% for the year. The other gainer is VMware, which is up 5% because it agreed in May to be acquired by Broadcom for $61 billion.
While Meta, Amazon and Tesla have been pummeled, investors turned to 111-year-old IBM, betting on its stable earnings, alongside energy stocks such as Exxon Mobil, health-care names including Merck and industrials Northrop Grumman and Lockheed Martin.
IBM beats Big Tech in 2022
CNBC
IBM is “trading well above its historical range,” Bernstein Research analysts wrote in a Dec. 20 note to clients. The firm has a hold rating on the stock.
Nobody will mistake IBM for a growth stock. Expansion is consistently in the single digits, and last year the company spun off Kyndryl, its managed infrastructure services business, into a separate publicly traded entity. That cut head count by about 90,000.
But IBM generated $752 million in free cash flow in the latest quarter, up 25% from a year earlier, and paid out $1.5 billion in dividends. Third-quarter earnings and revenue both topped estimates, and the company raised its forecast for the full year.
Crawford Investment Counsel in Atlanta, which focuses on income and dividends, looked at IBM in 2016 and concluded that it would be too early for a major investment, said Aaron Foresman, an equity analyst at the firm.
‘Much closer to their vision’
Crawford’s thesis changed in 2019, after IBM bought faster-growing Red Hat for $34 billion. The firm, which today has $6.7 billion under management, boosted its IBM stake from $2 million to $30 million and kept buying until its holdings reached $109 million.
IBM took a hybrid approach to the cloud under CEO Arvind Krishna, who succeeded Ginni Rometty at the helm in 2020. After struggling to gain scale as a cloud infrastructure provider, the company bet that enterprises would use on-premises data center infrastructure as well as the public cloud, rather than relying entirely on one approach or the other.
“Three years later, it’s much closer to their vision than everything on public cloud,” Foresman said. His firm sold 3% of its shares in the second and third quarter of this year.
Consulting remains a huge part of IBM’s business, accounting for one-third of revenue. In that realm, IBM partners with the big cloud providers, rather than strictly competing with them. The company has a backlog of business with Microsoft worth more than $1 billion, and an even bigger one with Amazon, Krishna said in a conversation with RBC CEO Dave McKay in November.
IBM also made technological advances in 2022, introducing the z16 mainframe computer. When a new mainframe hits, many clients upgrade. That leads to greater hardware revenue and highly profitable transaction processing software to run on the machines. IBM’s prior mainframe boom cycle started in September 2019.
While IBM stayed away from any splashy high-priced acquisitions this year, it announced some smaller deals to enhance certain capabilities. Earlier this month, IBM agreed to buy Octo, a consulting company based in Virginia that targets government agencies. Terms weren’t disclosed. It also absorbed consulting companies Dialexa and Sentaca this year.
Foresman described the purchases as an appropriate use of capital and “so small that they’re not necessarily disclosing transaction multiples.”
Still, Krishna recognizes that the economic backdrop isn’t ideal. He said in October that higher prices have led to “some caution creeping into the conversations” in Europe, where the company has to prepare for a downturn. In the Americas, where IBM gets about 53% of revenue, the business climate is “very robust,” he said.
The Bernstein analysts said the stock’s direction from here might simply ride on the state of the economy, rather than any major catalyst inside the company.
“Given its defensive characteristics and historical performance, we believe that IBM is likely to fare well if we continue to have pressured markets, and likely to lag major indices if we enter a recovery period,” they wrote.
IBM’s model through 2024 calls for mid-single-digit revenue growth, translating into free cash flow growth in the high single digits.
That’s good enough for investors who look for safety in their equity bets.
“Combined with mid-single-digit revenue growth, a couple points better than that on EPS and a 5% dividend yield is — you know, that’s not a home run, but it’s well within our expectations for what we’re trying to accomplish,” Foresman said.
TikTok’s grip on the short-form video market is tightening, and the world’s biggest tech platforms are racing to catch up.
Since launching globally in 2016, ByteDance-owned TikTok has amassed over 1.12 billion monthly active users worldwide, according to Backlinko. American users spend an average of 108 minutes per day on the app, according to Apptoptia.
TikTok’s success has reshaped the social media landscape, forcing competitors like Meta and Google to pivot their strategies around short-form video. But so far, experts say that none have matched TikTok’s algorithmic precision.
“It is the center of the internet for young people,” said Jasmine Enberg, vice president and principal analyst at Emarketer. “It’s where they go for entertainment, news, trends, even shopping. TikTok sets the tone for everyone else.”
Platforms like Meta‘s Instagram Reels and Google’s YouTube Shorts have expanded aggressively, launching new features, creator tools and even considering separate apps just to compete. Microsoft-owned LinkedIn, traditionally a professional networking site, is the latest to experiment with TikTok-style feeds. But with TikTok continuing to evolve, adding features like e-commerce integrations and longer videos, the question remains whether rivals can keep up.
“I’m scrolling every single day. I doom scroll all the time,” said TikTok content creator Alyssa McKay.
But there may a dark side to this growth.
As short-form content consumption soars, experts warn about shrinking attention spans and rising mental-health concerns, particularly among younger users. Researchers like Dr. Yann Poncin, associate professor at the Child Study Center at Yale University, point to disrupted sleep patterns and increased anxiety levels tied to endless scrolling habits.
“Infinite scrolling and short-form video are designed to capture your attention in short bursts,” Dr. Poncin said. “In the past, entertainment was about taking you on a journey through a show or story. Now, it’s about locking you in for just a few seconds, just enough to feed you the next thing the algorithm knows you’ll like.”
Despite sky-high engagement, monetizing short videos remains an uphill battle. Unlike long-form YouTube content, where ads can be inserted throughout, short clips offer limited space for advertisers. Creators, too, are feeling the squeeze.
“It’s never been easier to go viral,” said Enberg. “But it’s never been harder to turn that virality into a sustainable business.”
Last year, TikTok generated an estimated $23.6 billion in ad revenues, according to Oberlo, but even with this growth, many creators still make just a few dollars per million views. YouTube Shorts pays roughly four cents per 1,000 views, which is less than its long-form counterpart. Meanwhile, Instagram has leaned into brand partnerships and emerging tools like “Trial Reels,” which allow creators to experiment with content by initially sharing videos only with non-followers, giving them a low-risk way to test new formats or ideas before deciding whether to share with their full audience. But Meta told CNBC that monetizing Reels remains a work in progress.
While lawmakers scrutinize TikTok’s Chinese ownership and explore potential bans, competitors see a window of opportunity. Meta and YouTube are poised to capture up to 50% of reallocated ad dollars if TikTok faces restrictions in the U.S., according to eMarketer.
Watch the video to understand how TikTok’s rise sparked a short form video race.
The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images
Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.
The funding would value the company at over $120 billion, according to the report.
Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.
The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.
Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.
The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.
“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”
Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.
David Paul Morris | Bloomberg | Getty Images
Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.
“GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”
The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.
Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.
Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.
Read more CNBC tech news
Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.
During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.
Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.
Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.
Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.
“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.