New IBM Price Target After $2 Billion Quantum Computing Boost
The Big Tech firm has received a significant boost in its efforts to dominate the emerging sector.
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The news broke on Thursday morning. I touched on it in the morning’s “Market Recon” column. The Trump administration’s Department of Commerce has signed nine letters of intent to provide more than $2 billion in federal incentives to fund the buildout of a domestic quantum computing supply chain.
The funding is to be generated under the CHIPS and Science Act of 2022. International Business Machines, commonly known as tech giant IBM (IBM), appears to be a key driver of quantum technology and indeed is recognized as a likely big winner here by the Commerce Department.
According to The Wall Street Journal’s Amrith Ramkumar and Heather Somerville, the department has agreed to dish out $1 billion or almost half of the entire package, to IBM. In turn, IBM will launch “Anderon” which is to be a standalone quantum chip manufacturing company with another $1 billion invested by IBM itself.
IBM described Anderon as America’s first pure-play quantum foundry. Separately, but part of the same package, GlobalFoundries (GFS) announced that it had entered into a letter of intent with the Commerce Department that would land that firm $375 million to accelerate the development of its new quantum business, to be known as “Quantum Technology Solutions.”
In addition to those “headline” deals, the Commerce Department is taking a non-controlling equity stake in seven much smaller “pure-play” quantum computing companies while providing funding of up to $100 million a piece. Among publicly traded companies included among those seven are D-Wave Quantum (QBTS), Infleqtion (INFQ) and Rigetti Computing (RGTI). Infleqtion, readers may recall, is a former Sarge-folio and $10K Portfolio holding. IBM is currently the Sarge-folio’s fifth-largest holding.
On Anderon
As mentioned above, in addition to the $1 billion in CHIPS incentives provided by Commerce, IBM will contribute $1 billion of its own cash into Anderon.
IBM also plans to invest significant intellectual property, assets and skilled labor. Additional investors are expected to become involved as Anderon grows. Anderon will be headquartered in Albany, New York as a standalone company, and will operate as a 300 mm quantum wafer foundry. Anderon will first support wafer fabrication for superconducting qubit and supporting electronics wafers. The goal is to expand into other quantum modalities as the business develops.
The Chart
Readers will see that after falling out of bed late this past Winter, IBM developed a rectangle or flat-base pattern with a $258 pivot over the following three-month period. The stock, rallying off of the recent news, is trying to break out of that pattern. Even if this pivot can be taken and held, the 200-day SMA, currently at $270, presents as what I see as a more significant level for professional investors.
Above the chart, readers can see that relative strength is now quite robust, but still not quite in a technically overbought condition. Below the chart, the MACD now has a lot of bullish momentum, after having been weak for some time. Within that index, the histogram of the nine-day EMA is now well into bullish territory while the 12-day EMA has crossed above the 26-day EMA. I am long this name and plan to add either on a text of the 50-day SMA below or on momentum after that 200-day line is won.
International Business Machines (IBM)
Target Price: $337
Pivot: 200-day SMA (Currently $270)
Add: Down to 50-day SMA (Currently $238)
Panic: Loss of the May low of $212
At the time of publication, Guilfoyle was long IBM equity.
