IBM (NYSE:IBM) investors haven’t had all that much to complain about in 2019. After a precipitous drop over the final several months of 2018, IBM stock has grown in value 26% so far in 2019. It hasn’t been all smooth sailing — August was a rough month for investors — but it’s hard to argue with that kind of growth, especially in an information technology company that’s often seen as a dinosaur from another era.
The company’s acquisition of Red Hat gets a lot of the credit for helping to goose the IBM stock price, but on Thursday it was another of IBM’s bets that gave its stock a pop: blockchain.
GMEX Technologies announced its latest GMEX Fusion suite (used to manage digital assets including cryptocurrency at an institutional level) will be powered by IBM’s Blockchain Platform. IBM stock popped as much as 1.8% on the news on Thursday, before closing at $142.97 for a more modest 0.53% gain.
Could Blockchain Help Boost IBM Stock Price?
Blockchain is one of those tech terms that began floating around as a key part of the cryptocurrency market. It was developed just over a decade ago as a way to securely track transactions using the cryptocurrency bitcoin. The benefit of blockchain is that “blocks” of data representing every transaction (including the parties involved and the currency amounts) are timestamped, linked together, encrypted, and distributed. This provides a very secure record that can’t be easily modified.
Note: there is also a cryptocurrency company called Blockchain, but it is separate from blockchain technology …
Blockchain was developed to track Bitcoin transactions, but it turns out the technology has very interesting enterprise applications. For example, the use of blockchain can speed up banking transaction times, it can be used to track patient health records and it’s already being used to track products through the supply chain. In other words, blockchain may have been developed as an integral part of cryptocurrency, but the technology has expanded far beyond that initial use.
Worth around $700 million in 2018, a recent report by Wintergreen Research (via CNBC) puts the global blockchain market at $60 billion by 2024. You can see where International Business Machines stock could see significant upside from IBM’s Blockchain Platform.
Of course, IBM isn’t the only tech giant that has decided to take a stab at the blockchain game. Amazon (NASDAQ:AMZN) offers an Amazon Managed Blockchain service. Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google has also been ramping up efforts this year, focusing on enterprise blockchain solutions. Microsoft (NASDAQ:MSFT) offers a blockchain solution on its Azure cloud services. That’s in addition to a long list of startups focused on blockchain, including this list of companies to watch published earlier this year by Forbes.
Bottom Line for IBM Stock
As InvestorPlace’s Tom Pauli points out, IBM’s $34 billion acquisition of Red Hat was a huge move that massively bolstered the company’s cloud offerings. The Red Hat purchase and optimism it generated is a big part of the growth in IBM stock value in 2019, and is helping to dispel that “dinosaur” image.
There’s no doubt it’s going to be a big part of IBM’s future growth. But the company’s bet on blockchain is also beginning to pay off. Thursday’s IBM stock price pop wasn’t much in the grand scheme of things, but it shows that the market is taking blockchain seriously.
IBM’s GMEX Technologies deal wasn’t the same as signing a multinational financial organization, but the company claims it now has over 500 IBM Blockchain clients. With its reputation as an established information technology company, 60 data centers globally and ownership of Red Hat, IBM is well-positioned to leverage its position to take full advantage of the growing interest in blockchain — and grab a big chunk of that predicted $60 billion blockchain market.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.