IBM is a legit alternative in A.I. to Google and Facebook, says top analyst

Key Points
  • IBM is a legit differentiated pick in AI
  • Google is a horizontal play. IBM is a vertical play.
IBM posts earnings beat but sales fall short

If you're looking into artificial intelligence, IBM might be a different pick from stocks you already own, Ark Invest analyst James Wang said Wednesday.

"IBM we think is a legit differentiated pick," Wang said on "Squawk Box." "If you're going to invest in artificial intelligence, as a theme there is one great horizontal play, and that's Google ... and there's a great vertical play, and that's IBM."

Shares of IBM took a beating on Wednesday, a day after the company reported its first-quarter sales fell short of Wall Street's expectations, marking five-straight years of declining year-over-year quarterly revenue.

(Source: FactSet.)

The company represents the fourth highest-priced stock in the price-weighted Dow Jones industrial average and is expected to shave nearly 60 points off the index on Wednesday.

The disappointing quarterly report comes as the company transitions from its traditional business to one that includes cloud-based services, AI, data analytics and security software.

Wang said the company's investment in research and development has been aggressive, spending about 4 percent of revenue on it consistently over the last few years.

"I think their accounting is pretty fancy. If you look at the actual results of the R&D output, there's no way but to recognize they're actually doing really good work," he said.

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