IBM best Dow stock in past 3 months but has disappointing AI message
IBM has been the best-performing stock in the blue-chip Dow Jones Industrial Average over the past three months, climbing 27%, but according to Scott Nations, president and chief investment officer of Nations Indexes, the original tech stock has more to prove in artificial intelligence. Nations appeared on CNBC’s “Power Lunch” on Wednesday to share his views on three stocks on the move lately. He said he is taking a wait-and-see approach to IBM after a strong run. Here were his quick takes during “Three-Stock Lunch.” IBM IBM last week reported fourth-quarter results whose earnings and revenue topped Wall Street estimates. The tech firm said software revenue grew 10% to $7.9 billion from the year-earlier period, partially due to demand for AI technology and strong performance from its Red Hat Linux operating system. Still, Nations said there are nagging worries about the stock despite IBM’s robust earnings. IBM shares touched an all-time on Wednesday. IBM is “approaching AI differently than some of the other big names, taking more of the DeepSeek approach; we’re going to have to see if that works for them,” Nations said. “So I’m holding until we get a little bit more clarity.” China’s DeepSeek shook global stock markets after revealing that it had built a powerful AI model for just $6 million. Some have disputed the shockingly low cost of developing the AI models, while others believe DeepSeek has sharply cut the cost of running powerful AI models and that the firm’s decision to release its technology for free has altered the course of the industry. In a statement, IBM CEO Arvind Krishna said the company has secured $5 billion in bookings for its generative AI business, which includes sales and future sales in the company’s software and consulting division. “We closed the year with double-digit revenue growth in Software for the quarter, led by further acceleration in Red Hat,” Krishna said in a statement. “Clients globally continue to turn to IBM to transform with AI.” Uber Nations is buying the dip in Uber after the ride-hailing company sold off sharply Wednesday following a quarterly earnings miss and soft guidance about future results. The money manager likes the fact that Uber is accelerating stock repurchases. Uber also announced it is gearing up for the public launch of robotaxi rides in Austin, Texas, through its partnership with Alphabet’s Waymo division. Uber estimates that the autonomous vehicle market in the U.S. alone is a trillion-dollar opportunity, but CEO Dara Khosrowshahi said it will take “many, many years” to build out the business. Even with the company’s “aggressive investments” in the technology, it is unlikely to affect Uber’s outlook in the near term, he said. Mattel Mattel’s shares soared 14% to a 52-week high Wednesday after the Barbie maker posted better-than-expected fourth-quarter results. Mattel reported profits of 35 cents per share, excluding one-time items, on revenue of $1.65 billion. Analysts polled by LSEG forecast 20 cents per share on revenue of $1.63 billion. Nations said he would buy the stock if it dips below $20 per share. Mattel briefly traded as low as $20.18 Wednesday morning. He added that investors could be cheering on the toymaker’s increased stock buyback authorization. “What really gets people interested are the stock buybacks — $600 million in 2023 and 2024 combined, another $600 million this year,” Nations said.
