American technology firm IBM saw a massive sell-off on Tuesday, with its stock crashing by around 25 per cent. According to reports, this is the worst stock crash the IT major has faced in 58 years. This crash has resulted in a massive loss of approximately USD 67 billion to USD 70 billion in a single day. Amid this, the American Depositary Receipts (ADRs) of Indian IT companies Infosys and Wipro saw a sharp decline during US stock market trading hours. Infosys’s ADR fell 7.91 per cent to USD 11.5, while Wipro’s dropped 4.21 per cent to USD 1.90. After the market opened, Infosys’s ADR was down 4.8 per cent, while Wipro declined by approximately 4 per cent.
What is an ADR?
An ADR or American Depositary Receipt, is a financial instrument that allows investment in the shares of a foreign company through the US stock market. US banks issue ADRs to Indian companies based on their shares. Subsequently, US investors can buy and sell these ADRs on American exchanges such as the NYSE or NASDAQ.
What led to the massive fall?
The sharp downfall came after the company lowered its revenue outlook and admitted it had failed to keep pace with rapidly changing customer spending patterns in the era of Artificial Intelligence (AI). Founded in 1911, IBM said its revenue for the three months ending in June rose just one per cent to USD 17.2 billion.
According to IBM CEO Arvind Krishna, the company failed to respond to the rapidly changing market in a timely manner. He told investors that they failed to anticipate the situation and make quick decisions, which led to a sharp sell-off in the stock.
“We faltered… and did not adapt and move quickly enough,” IBM CEO Arvind Krishna said in a letter to investors.
According to the IBM CEO, customers delayed software purchases as businesses focused more on cybersecurity amid growing AI-powered cyber threats.
Krishna said that with the advent of AI, hackers’ cyberattacks have become more dangerous and advanced. Therefore, companies are focusing on strengthening their cybersecurity instead of spending money on old projects. Earlier, the company said that AI impacted around 8,000 jobs.
ALSO READ | SBI Funds Management IPO GMP today, price band, issue size, share listing date and other details
