IBM is on track for its biggest share price slump on record after warning that AI is eating into its business.

More than $68bn (£50bn) was wiped off the company’s value at the start of trading on Tuesday after the company said customers were ploughing money into the AI boom rather than its products.

If sustained until the close of trade, the plunge of more than 25pc in IBM’s share price would be its biggest single-day drop on record, dating back to 1968. It joined the New York Stock Exchange in 1915.

Arvind Krishna, IBM’s chief executive, said the company had “faltered” as clients shifted spending away from software and consulting services and towards AI infrastructure.

He said: “In the last few weeks of June, we saw clients shift their quarterly capex [capital expenditure] spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.

“This dynamic impacted client buying patterns. While we anticipated some supply chain-related impact in our expectations, we did not anticipate the magnitude of the capex reprioritisation.”

IBM released a new mainframe processor for AI applications at the start of the quarter, but this was unable to offset a downturn in the rest of the business. The company provides software and consulting services to businesses, as well as its own hardware.

Mr Krishna said IBM was on track for second-quarter revenues of $17.2bn, compared with analysts’ estimate of $17.9bn. Profit flatlined.

Mr Krishna said: “These conditions require our teams to execute perfectly, and this quarter we faltered.

“We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.”

The weaker-than-expected results had a ripple effect on software stocks across Wall Street and beyond.

In the US, Oracle dropped 1.3pc, Accenture declined 2.1pc, Microsoft fell 1.5pc, and Salesforce dropped 2.5pc.

In Britain, analytics software business Relx plunged 2.4pc, accounting company Sage sank 1.7pc and London Stock Exchange Group, which had marketed itself as a specialist data provider, was down 0.9pc.

Investors have long been concerned that AI tools pose an existential threat to the software industry. AI models promise to perform the same task as software when given the same command.

The scale of investment in AI is also distorting global investment flows. Companies such as Meta, Alphabet and Microsoft, called AI hyperscalers, are doubling their capital expenditure this year to some $800bn as they seek to secure market share in the nascent technology.

Between 2025 and 2030, capital investments are expected to rise by 20pc per year, the fastest growth rate ever seen in this industry, while revenues are expected to grow by 15pc annually.

Donald Trump lavished praise on Mr Krishna during the chief executive’s visit to the White House last December.

“IBM CEO Arvind Krishna, who’s a great man, who’s [doing] a really great job. What a job you’ve done,” the US president said.

Mr Trump also joked: “I used to have that stock when it was much, much lower. I brilliantly sold it when I became president. That was not a good move.”