MW IBM takes a cue from Apple with $150 billion investment - but here's the twist

By Therese Poletti

IBM doesn't do much overseas manufacturing but may be trying to protect some of its consulting contracts with the U.S. government

IBM Corp. pledged to spend $150 billion on various U.S. investments over the next five years as part of its strategic focus on quantum computing and artificial intelligence.

The move is possibly aimed at retaining its U.S. government contracts.

While IBM $(IBM)$ now gets more revenue from software than hardware, it already makes most of its remaining hardware products in the U.S. Those include its mainframe computers, which are manufactured in Poughkeepsie, N.Y.

That puts IBM at odds with other American companies that recently announced big U.S. investment plans. In February, Apple Inc. $(AAPL)$ pledged to spend and invest more than $500 billion over the next four years in the U.S. Apple said it would double its server manufacturing fund in Texas, invest in Apple Intelligence and its infrastructure and support Apple TV+ production in the U.S.

Apple, however, makes most of its products overseas and could have been trying to curry favor with the Trump administration ahead of the tariff announcements. IBM doesn't have to worry as much about tariffs.

But IBM has a large consulting business, which was already seeing some impact from the Trump administration's ongoing cost-cutting measures.

"We are not immune from all those activities, just like everybody else," IBM Chief Executive Arvind Krishna, told analysts last week on the company's earnings call. "We had a couple of contracts that were impacted in the first quarter."

Krishna said IBM did some work for the U.S. Agency for International Development (USAID), which was shut down by Trump. "You would expect USAID, where we did some work was impacted, but not really in most other cases." He said IBM's contracts tend to be more mission-critical, "much more about building the government systems." Those are more efficient, he added, but "it's hard to predict where that goes over the rest of the year."

IBM said its consulting revenue was down 2% to $5.1 billion, in the first quarter, or flat on a constant-currency basis.

Analysts believe the company is trying to prevent further loss of business by showing its commitment to the U.S., especially since quantum computing is still in its early days.

"While we believe IBM will continue to invest in the emerging area of quantum technology, the bombastic figure is more likely a gesture towards the U.S. administration," said Gil Luria, an analyst with D.A. Davidson. "Large technology companies are trying to protect their businesses from trade conflicts and are doing so by making big promises around investment in the U.S."

Apple appeared to be doing what it could to avoid tariffs on iPhones, the bulk of which are manufactured in China. While it is moving more of its manufacturing to India, Apple is still expected to see an impact from the tariffs during the second half of its fiscal year.

"I think they are taking a page out of the Apple and TSMC playbooks," said Dan Ives, a Wedbush Securities analyst. "Invest in the U.S., it's already part of their strategy but it certainly doesn't hurt when it comes to playing nice in the sandbox with the Trump administration."

IBM shares rose 1.6% on Monday.

-Therese Poletti

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April 28, 2025 16:37 ET (20:37 GMT)

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