IBM employees watch $400 million vanish as stock hits worst day — a reminder about holding too much company stock

While the SpaceX IPO turned thousands of current and former employees into millionaires (1), not every staff shareholder story has the same happy ending. Take, for example, the workers at another tech giant who are now facing collective losses of an appalling $400 million because of their company's struggles.

IBM (IBM:NYSE) may be one of the most established names in the technology sector, but that doesn't make it immune to the fluctuations of the ever-mercurial market. In fact, its decades-long legacy as an enterprise software giant may have indirectly had a hand in its stock price plummeting by 25% on July 14, marking the worst share day in its history (2).

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Unfortunately, with companies rushing to scale AI capabilities amid a components crisis , clients have shifted budgets into chips and associated data center hardware to a level that CEO Arvind Krishna said his team "did (3) not anticipate (3)."

In an early second-quarter earnings announcement, IBM reported $12.3 billion in revenue, which was $660 million less than projected, leading to adjusted earnings per share falling 8 cents below expectations.

The stock tumbled more than $73 as a result, spelling disaster for the 150,000 or so employees who hold company shares in their 401(k).

The losses amount to some $400 million (4) total; thankfully, it's not a substantial portion of the $59 billion the IBM 401(k) plan is estimated to be worth, but it's still significant. It's also very telling of the dangers of over-investing into any one entity.

Experts speaking to (5)MarketWatch (5) on Tuesday warned against letting "corporate loyalty cloud financial judgement," and emphasized the importance of diversifying, no matter how confident in any one investment position you may be.

Defensive investing and ensuring you are truly diversified — meaning you have, at most, 25% in any given sector, and a maximum of 5% in any given position, among other things — are essential .

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The instant and devastating impact that IBM's earnings posting had on its stock price is an example of a larger recent phenomenon that Mad Money host Jim Cramer called out earlier this year.

The pundit decried the stock market's tendency to excessively "punish" firms that can't match the outsized momentum (real or perceived) of the AI boom when it comes to forecasts or, in this case, posted earnings.

Speaking of the fact that we are in "a market that despises anything not connected to tech and the data center," Cramer said that investors are now "unsafe at any level."

"We keep hearing this drumbeat that 2026 is 1999 all over again, but the difference between now and 1999 is that this market does not stop punishing the companies that disappointed … You are unsafe at any level," he said in May.

Though IBM is in the business of tech, it is somewhat of an old era stock compared to its new era AI counterparts, who are the sole drivers of recent stock market rallies, and also some of the only ones benefitting from them.