It\u2019s an open secret (that is, not many people seem to know) that the institutions keeping the global financial system turnig over run code that is ancient, barely understood, and frighteningly hard to replace. Now, AI is finally making that problem solvable \u2013 and the market has responded with a reality check for one of technology\u2019s oldest names.
\nIBM shares recorded their worst single-day drop in more than 25 years earlier this week, plunging 13% after AI startup Anthropic said its Claude Code tool can accelerate COBOL modernisation \u2013 the kind of painstaking, expensive legacy work that has underpinned a portion of IBM\u2019s consulting revenue for years.
\nAn Anthropic blog stated that \u201cmodernising a COBOL system once required armies of consultants spending years mapping workflows,\u201d and argued that tools like Claude Code can now automate the exploration and analysis phases that consume most of the effort in COBOL modernisation. That single claim was enough to send investors reaching for the sell button.
\nCOBOL is bigger than most realise
\nTo understand why the reaction was so sharp, it helps to understand just how entrenched COBOL remains. Hundreds of billions of lines of COBOL code run in production daily, powering critical systems in finance and government sectors. The language handles an estimated 95% of ATM transactions in the US alone.
\nThe deeper problem isn\u2019t the code itself \u2013 it\u2019s the people who understand it. The number of developers who understand COBOL continues to shrink as the workforce that built these systems has largely retired. That talent scarcity is precisely what made COBOL modernisation so expensive for so long, and what made large consulting engagements \u2013 the kind IBM and rivals like Accenture and Cognizant built profitable practices around \u2013 essentially unavoidable.
\nAnthropic argues that AI flips this equation entirely. Claude Code works by mapping dependencies in thousands of lines of code, documenting workflows, identifying risks faster than human analysts, and providing teams with deep insights for informed decision-making. The company says teams can now modernise COBOL codebases in quarters not years.
\nIBM was already here
\nWhat the market\u2019s reaction may be overlooking is that IBM itself has been making this argument for some time. Anthropic\u2019s post comes about three years after IBM itself suggested using AI to rewrite COBOL as Java and created a product called \u201cwatsonx Code Assistant for Z\u201d to do it. IBM CEO Arvind Krishna said as recently as July 2025 that the company\u2019s AI coding assistant for mainframes \u201chas got very adoption,\u201d with the majority of customers using it to understand their COBOL codebase and decide what to modernise.
\nIBM defended its position on Monday, saying its mainframe platform delivers the same quality of performance and security regardless of programming language \u2013 COBOL or otherwise. And analysts were quick to add nuance to the panic.
\nEvercore ISI analyst Amit Daryanani noted that \u201cclients already had the option to migrate from the mainframe, yet they are sticking with the platform,\u201d suggesting the fear of displacement may be outrunning the reality.
\nThe broader pattern
\nIBM wasn\u2019t alone in taking a hit. Accenture and Cognizant also declined following the news \u2013 a sign that investors are looking at the entire consulting model around legacy modernisation, not IBM\u2019s mainframe hardware business. Just last week, cybersecurity stocks sold off sharply after Anthropic announced Claude Code Security, a tool that scans codebases for vulnerabilities.
\nThe pattern is becoming familiar: each new AI ability announcement triggers a reassessment of which existing revenue streams might be compressed, and the market prices in fear immediately.
\nIBM didn\u2019t stay quiet. Rob Thomas, the company\u2019s Senior Vice President and Chief Commercial Officer, pushed back directly in the aforementioned blog post, drawing a line the market appeared to have missed: \u201cTranslating code is one thing. Modernising a platform is something else entirely. The two are not the same, and the gap between them is where most enterprises run into trouble.\u201d
\nHis argument is worth sitting with. The value IBM\u2019s mainframe delivers, Thomas contends, has nothing to do with COBOL as a language \u2013 it lives in the vertically integrated stack underneath it: z\/OS, transaction processing architecture, quantum-safe encryption, and decades of hardware-software optimisation that no code translation tool touches.
\nAnthropic\u2019s Claude Code, in his reading, is solving a real problem \u2013 just not the one that matters most for enterprises running IBM Z. He also raised a point that complicates the headline narrative further: roughly 40% of COBOL actually runs on Windows, Linux, and other distributed platforms \u2013 not mainframes at all.
\nMuch of what\u2019s being framed as an IBM mainframe story is partly a distributed systems problem that has been folded into a mainframe headline. IBM\u2019s own clients are already making the case.
\nRoyal Bank of Canada has used IBM\u2019s watsonx Code Assistant for Z to map dependencies and build modernisation blueprints for core applications. The National Organisation for Social Insurance reported a 94% reduction in time to analyse legacy COBOL code using the same tool \u2013 cutting an eight-hour task to roughly 30 minutes.
\nWhether Monday\u2019s selloff was a fair verdict or a reflexive one, the underlying change is real: AI is making COBOL modernisation economically viable for the first time in decades. The question IBM is asking \u2013 and the market hasn\u2019t fully answered \u2013 is whether that\u2019s a threat to its business or an acceleration of the transformation it\u2019s already leading.
\nSee also: Hitachi bets on industrial expertise to win the physical AI race<\/p>\n
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