Outlook for quantum computing and AI business looks promising, Susquehanna initiates IBM (IBM.US) with a "hold" rating.

Investment bank Susquehanna has initiated coverage on IBM (IBM.US) for the first time, giving it a "hold" rating and setting a target price of $303. The firm believes that IBM still has growth potential in quantum computing, the Watson AI platform, and software business, but its consulting business faces challenges from automation and industry oversupply. Susquehanna analyst James Friedman stated in a report released on Friday that IBM's quantum computing business has significant long-term value, with an estimated valuation of around $65 per share. Meanwhile, the accumulated orders for the Watson AI platform have exceeded $12.5 billion, the software business is expected to maintain double-digit growth, and the next-generation z17 mainframe product cycle is likely to continue to drive performance growth. However, the firm is cautious about the prospects of IBM's consulting business. Friedman pointed out that with the rapid proliferation of automation technology and increased industry supply, the consulting business may face significant competitive pressure in the future. In addition, IBM's stock price has risen by approximately 25% in the second quarter of 2026, reaching near historical highs, with a valuation premium about 9 times higher than historical average levels and about 3 times higher compared to the S&P 500 index. Nevertheless, Susquehanna remains optimistic about IBM's competitive advantage in the field of quantum computing. Friedman stated that IBM has been a leading player in the quantum computing industry and continues to achieve established technological goals ahead of schedule. While the quantum computing market is still in its early stages of development and there is significant uncertainty, considering its potential market size, IBM is poised to capture a significant market share. The firm also believes that IBM's strategy of creating a global leading "hybrid cloud + AI" platform sets it apart from major cloud service providers such as Amazon.com, Inc., Alphabet Inc. Class C, and Microsoft Corporation Azure. Friedman stated that IBM is not attempting to create another public cloud service provider, but is positioned as a governance and orchestration platform for enterprises to deploy AI applications and manage workloads in hybrid and multicloud environments. This positioning has strong competitive barriers in industries with high regulatory requirements and profit margins, such as finance and healthcare, and is expected to be a key support for IBM's continued growth in the future.