IBM Stock Rallies Back Near Record Levels Following Quantum Report, Q3 Earnings Reaction

IBM IBM stock jumped on Friday after a report on its progress in quantum computing with the help of chips from… Advanced micro devices (AMD). The gains pushed IBM past a previous buy point and erased Thursday’s loss that followed the tech giant’s third-quarter earnings report.

IBM will soon publish a paper demonstrating its ability to run a quantum error correction algorithm on AMD processors, according to a Reuters report. AMD shares also rose on Friday.

Quantum computers rely on so-called qubits to process information at a significantly faster rate than classical computers. But this process can be subject to errors caused by small environmental disturbances and other factors. A major challenge for quantum computing is developing a system to quickly identify and correct these errors.

IBM announced last June that it had developed an algorithm to increase the efficiency of quantum error correction, according to a Reuters report. The report said the company will publish a research paper next week on IBM’s progress in using AMD chips.

Showing that the algorithm can work using a readily available computer chip is a “big deal,” Jay Gambetta, director of research at IBM, told Reuters.

IBM also announced last June that it plans to build a large-scale quantum computing center in Poughkeepsie, New York, by 2029.

The company is racing against giants like Amazon (Amzn), Microsoft (MSFT) and Google-parent alphabet (GOOGL) is racing to build powerful quantum computers. There are also specialized quantum companies such as D wave Quantity (QBTS) and Ion Q (IONIC).

AMD and IBM announced in late August that they would collaborate to “develop next-generation computing architectures.”

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IBM shares regain buy point

On the stock market today, IBM stock is up more than 7% at 305.57. AMD shares jumped more than 6% to 251.32.

IBM shares closed slightly lower Thursday, recovering from the selloff seen earlier in the day that saw shares fall as much as 8%. Investors were digesting third-quarter results that saw IBM beat both top and bottom line forecasts but report slower-than-expected growth for Red Hat’s closely watched cloud software business.

Analyst comments were mostly positive after Wednesday’s report. BofA Securities analyst Wamsi Mohan reiterated the buy rating in a note to clients on Thursday. IBM’s revenue mix continues to shift “to higher margin software and generates strong free cash flow, and we expect positive estimate revisions to continue,” he said.

“We would be buyers of any modest weakness in the stock,” Wedbush analyst Dan Ives wrote. He pointed to IBM’s position of “capitalizing on the current wave of demand for hybrid cloud and AI applications.”

With Friday’s jump, IBM stock rose back above its base buy point of 301.04 COP. IBM shares first rose above that level earlier this month, after announcing a partnership with Anthropic. Shares are on track to close at a record high, IBM’s first since October 7.

For AMD, Friday’s gains add to a huge rally that has seen shares rise 55% this month and 107% since the beginning of the year. The gains were helped by major chip deals oracle (ORCL) and OpenAI.

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