IBM shares collapsed 23% in Tuesday trading, marking the company's most severe single-day decline since the 1987 market crash.
The sell-off was triggered by a preliminary profit warning for the second quarter, which revealed adjusted earnings significantly below analyst expectations.
The sharp repricing reflects investor anxiety over the sustainability of IBM's hybrid cloud and AI growth narrative amid broader software sector headwinds.
The magnitude of the drop highlights the fragility of valuations in the enterprise software space.
With IBM having been a key beneficiary of the AI infrastructure build-out, the warning suggests that revenue growth may not be translating into expected margin expansion.
Traders are now reassessing the risk profile of large-cap tech names that have seen significant multiple expansion over the past two years.