Jefferies advises against Watson investments: 'IBM appears outgunned in the war for AI talent'

IBM has underperformed in creating shareholder value despite offering "one of the more mature cognitive computing platforms today," according to a report by global investment banking firm Jefferies.

IBM's artificial intelligence platform, Watson, is one of the most complete cognitive services available in the market, according to Jefferies analysts. However, other companies — from tech giants to startups — are making significant investments in the AI space and may soon overtake IBM.

"Our analysis of job listings also suggests that IBM appears outgunned in the war for AI talent," the report reads. "Amazon, for example, has more than 10x the job listings of IBM."

A significant barrier to IBM's success in the market is the "hefty services component" to deploying its product, analysts suggest. Watson implementations often require significant consulting work as the company curates relevant data "making some organizations balk at engaging with IBM," the report states.

Given the range of cognitive platforms entering the marketplace, Jefferies analysts suggest consumers may increasingly search out separate firms working in the machine learning and deep learning fields.

"Our analysis suggests that the returns on IBM's investments aren't likely to be above the cost of capital," the analysts conclude.

Click here to view the full report.

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