Everyone loves a good rivalry: Red Sox-Yankees. Real Madrid-Barcelona. Hyperscalers-chipmakers
It’s that last matchup that’s commanded attention in the stock market lately. After a long period of hyperscaler dominance, the tables have turned and semiconductor makers — particularly producers of memory chips — have gone parabolic
But as investors, pundits, and newsletter-writers everywhere have pitted these two groups against one another, the most pronounced struggle has been elsewhere, in software
If chipmakers are the picks-and-shovels portion of the AI trade and hyperscalers are the builders, software providers are further downstream. They’re the deployers and enablers. And in recent months, investors have continually shown that they prefer the more tangible end of the spectrum
IBM’s disastrous preliminary second-quarter earnings results were a prime example of that on Tuesday. It was bad enough that the company missed analyst estimates. But CEO Arvind Krishna rattled traders even further by acknowledging that IBM was slow to react to the shift away from software, towards servers and chips
It reaffirmed what we’ve already been seeing for weeks: a rotation away from discretionary IT spending — an area where IBM thrives — in favor of more data-center-focused endeavors
The stock-market comeuppance was swift and brutal. Shares plummeted 25%, their worst loss ever. Over the past week, IBM stock has gone from positive in 2026 to down 26TK% year to date. Life comes at you fast
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A widely traded ETF of software stocks initially tanked on the news before rebounding into positive territory on Tuesday, although it did lag the broader market. Notable software names like ServiceNow, Atlassian, Adobe, and Workday each slid more than 3TK%
Meanwhile, a familiar winner emerged entirely unscathed, if not emboldened by the IBM earnings: Dell. To understand why, look no further than the PC-maker and budding AI power-player falls on the supply-chain spectrum
Dell serves as a sort of connective tissue in between chipmakers and hyperscalers. It takes chips, builds complete AI servers and racks, and sells those to the Microsofts and Metas of the world. It’s in the AI-buildout process at least two steps earlier than IBM
And to add insult to injury for IBM, Dell’s server and storage businesses will be among the main direct beneficiaries of Tuesday’s grim earnings announcement
So the next time you’re trying to sort through the confusing pile of AI winners and losers, the best thing you can do is figure out where a company falls on the AI-supply-chain ladder. As of right now, the higher the better
