Why IBM stock just crashed 25%

IBM. Just had its worst day in years, plunging 25%. But this isn't just an IBM story. It actually tells us where the AI trade is headed. I'm Paulina Leico, CNBC stock market reporter. Let's break it all down. IBM warned that its second quarter revenue is going to come in well below Wall Street expectations. Specifically, its software business, which is IBM's largest and most profitable division, came in much slower than expected. IBM said many customers delayed software purchases because they were allocating more spending to the AI infrastructure build out, dealing with cyber security challenges. So instead of buying more software, companies are spending more money on hardware for the AI build out on things like servers, chips and data center infrastructure. So that's why IBM fell, but semiconductor stocks actually rose. That shows that right now, the winners of the market are those that sell the picks and shovels of the AI boom. Eventually, software may benefit again once the AI infrastructure build out is over. But in the meantime, the market is sending a very clear message that companies that the AI infrastructure build out are now the winners. So this is something that every investor needs to be aware of.