IBM CEO says this is what could topple the digital economy

IBM CEO Ginni Rometty said one of the biggest issues for every government right now is privacy of consumer data but that a barrage of regulations could destroy the digital economy.

"Every government is itching to regulate, and the risk we all have is that there's a great overreaction. The casualty is the whole digital economy," she told CNBC's "Squawk Box" at the World Economic Forum in Davos, Switzerland, on Tuesday.

Rometty said there are other ways to protect consumers. She points to what she refers to as "precision regulation."

"Really what we have to protect is consumer privacy, and that's consent, opt out, ability to delete, and that is what I would call almost like precision medicine — precision regulation," she said.

Rometty said privacy is sacrosanct. "We're 108 years old, and we have always lived by that view. We exist because clients trust us with data. So I think every company now has to do that, when everyone's looking to benefit from it. If you're gonna benefit from it, you have to live by those rules," she said.

Rometty said that in the future, technologies are going to learn with less data. "Value goes to those who refine it, not to those who just hold it," she said. "If, as an example, China has no privacy rules and has all this data, do they win in AI? Having a lot of data, for the current state of AI, is useful. But there's more and more AI innovation being done that learns with less data."

In October IBM acquired Red Hat, a major distributor of open-source software and technology, in a deal valued around $34 billion. "We are a company of the future," Rometty said. The open source, enterprise software maker will become a unit of IBM's Hybrid Cloud division. The acquisition is by far IBM's largest deal ever, and the third-biggest in the history of U.S. tech.

"It's really a good move for all of IBM because it's 200 basis points to all of IBM when we talk revenue growth. And when you look about where IBM is right now in this reinvention, what I would say is now it's up to us to consistently perform."