Shares of IT companies fell on Tuesday as AI disruption worries spooked investors. The Nifty IT index dropped 2.6% intra-day before settling with a 0.97% loss. Coforge led the day’s rout with an intra-day fall of 6.71% before recovering almost all the loss to close down 0.06% on the NSE.
Among large-caps, Wipro saw the maximum impact with an intra-day low of 3.52% before closing down 2.06%. Infosys dropped 1.26%, HCL Technologies Ltd. fell 0.59% and Tata Consultancy Services was down 0.63%.
Tuesday’s selloff came on the back of new announcements by Nvidia Chief Executive Jensen Huang to push deeper into central processing units as he introduced semiconductors made with technology acquired from startup Groq.
What does the Nvidia announcement imply?
Nvidia announcement implied that AI tools, which are challenging the IT business model that depends on labour-based billing and cost effectiveness, will be able to deliver solutions faster and better, resulting in larger competition for IT companies.
“It was more of a knee-jerk reaction because we saw the recovery by the end of the day. But, one cannot deny that AI announcements spooked the markets,” an analyst said.
Indian IT companies have been facing volatile times on the exchanges since February when AI solutions developer Anthropic had released new updates to its Claude Cowork tool.
What do analysts say?
“The recent selloff in IT services stocks appears to be driven by a combination of sentiment and macro concerns. Announcements around advanced AI models such as those from Anthropic have intensified investor fears that GenAI and emerging Agentic use cases could compress traditional services work like coding and testing,” Gaurav Parab, principal research analyst at NelsonHall, said.
The persisting West Asia conflict and resulting oil shocks are also creating uncertainty for global enterprises, which may delay discretionary IT spendings, experts said.
“Markets are reassessing the longer-term growth outlook for the sector as AI increases productivity and pushes clients towards outcome-based delivery models, rather than labour-based engagements,” Parab said.