IBM's stock took a significant hit during intraday trading, plummeting 5.05% as investors reacted to growing concerns about potential reductions in U.S. federal government contracts. The tech giant, known for its high exposure to government contracts, faced selling pressure as market sentiment turned cautious.

The worries stem from a broader industry trend affecting companies with substantial ties to federal contracts. According to a report by BMO Capital Markets, companies like IBM, along with ServiceNow and Accenture, have considerable exposure to the U.S. Federal government, which accounts for a significant portion of their revenues. The brokerage flagged uncertainties surrounding fewer contracts from the U.S. federal government, as well as broader risks to global GDP growth from tariffs.

While the report primarily focused on ServiceNow, the implications for IBM are clear, given its similar exposure to federal contracts. As the U.S. government potentially tightens its spending, tech companies heavily reliant on these contracts could face headwinds in the near term. Investors appear to be pricing in these risks, leading to the sharp decline in IBM's stock price during the trading session.