New York-listed shares of major Indian IT companies Infosys Ltd. and Wipro Ltd. fell sharply after fears grew that new AI tools could disrupt businesses. Both Infosys and Wipro ADRs were down 3% and 5% respectively. The tech-heavy Nasdaq Composite was also lower, down 0.10% at around 9:30 am ET. The sell-off was triggered after US-based AI firm Anthropic released a new automation product, which investors believe could reduce demand for traditional IT and data services.
On February 3, Infosys ADR (INFY) closed at $17.32 and Wipro ADR (WIT) ended the day at $2.64, trading in a narrower range of $2.51 to $2.68 and posting a modest gain over its previous close.
Over just two days, companies across Silicon Valley lost hundreds of billions of dollars in market value. The damage was felt across stocks, bonds and loans, hitting both large and small firms. Shares in software firms tracked by an iShares ETF have fallen so sharply that nearly $1 trillion in value has been erased in the past week alone, reportd Bloomberg.
This sell-off stood out from earlier market drops. Instead of fears about a market bubble, investors were shaken by a growing belief that artificial intelligence could soon disrupt the core business models of many companies that have long been seen as vulnerable.
‘I don’t think it’s an overreaction,’ says expert
Market strategist Michael O’Rourke of Jonestrading told Bloomberg that the reaction was not excessive. He noted that for the past two years, AI has been described as a technology that could reshape industries for generations, and recent developments suggest those changes are now starting to happen in real life.“For two years, we have been talking about how AI is going to change the world and that it is a multi-generational technology. In the past few weeks, we have seen signs of it in practice,” he said.
The immediate trigger was a low-key announcement by AI startup Anthropic, which launched a new tool designed to handle legal tasks such as reviewing contracts. On its own, the launch did not appear dramatic. But coming after a year in which Anthropic’s coding tools had already transformed parts of software development, the brief announcement was taken very seriously by the market.
Investors do not believe this particular product, at least in its current form, will completely upend the industry. Still, many see the regular flow of new AI tools as just as significant as the initial launch of ChatGPT.
Analyst Jackson Ader of KeyBanc warned that while AI is affecting legal technology today, it could soon move into areas like sales, marketing and finance, the report said.
The selling pressure spread widely, hitting legal software companies, data analytics firms and even financial services stocks. Worries deepened later on Wednesday after Alphabet said it would spend much more than expected on AI projects, and Arm Holdings issued a sales forecast that fell short of market expectations. Both shares declined in after-hours trading.
What triggered the fear
Anthropic on Tuesday launched a new AI automation product called Claude Cowork, along with 11 plug-ins. These plug-ins can automate tasks across legal, sales, marketing and data analysis functions. One plug-in focused on legal work drew particular attention, as it claims to automate tasks such as contract reviews and legal briefings. On its website, Anthropic has clarified, “All outputs should be reviewed by licensed attorneys.”
Claude Cowork is designed to act as an AI assistant that can carry out tasks directly on a computer, such as creating reports or organising files, without detailed instructions. Built on Anthropic’s Claude AI model, it allows even non-technical users to automate complex workflows.
This launch has created fears of disruption across the global software and services industry. Some investors described the impact as a “SaaSpocalypse,” saying the new tools wiped out hundreds of billions of dollars in software company valuations almost overnight.
Existing pressure from weak outlooks
The AI-driven sell-off added to existing pressure on Indian IT stocks. Wipro shares had already fallen nearly 7% on Indian exchanges after the company issued weak Q3 FY26 guidance and flagged softer deal momentum. Infosys ADRs had also declined after earlier earnings reports failed to impress global investors due to muted revenue growth and a cautious outlook.
Impact on Indian IT stocks
The decline in US tech stocks had spilled over to Indian IT companies listed in the US through American Depository Receipts, or ADRs. ADRs allow foreign companies to trade on US stock exchanges through certificates issued by US banks, similar to regular shares.
Infosys ADRs fell as much as 5.5% to $17.32, while Wipro ADRs dropped around 4.8% to $2.56. Investors in India closely track ADR movements because US markets trade while India is asleep, making ADRs the first indicator of how global events may impact Indian stocks when local markets open.
Tech market weakness
The anxiety around AI disruption also affected US tech stocks. Nvidia shares fell nearly 1% amid reports of cooling ties with OpenAI. The startup is said to be disappointed with Nvidia’s latest AI chips, which has slowed discussions around a potential investment of up to $100 billion.
Fears of AI-led disruption, weak earnings guidance, and broader tech sector uncertainty led to a sharp sell-off in Indian IT ADRs, setting the tone for investor sentiment ahead of the next trading session in India.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.