The tech stocks have seen some recovery in intraday trade. What’s the big call on the IT sector now? HSBC Global Investment Research indicated that software companies are likely to thrive by embedding AI into their platforms. JP Morgan explained that IT service providers will continue to be crucial “plumbers” for integrating these new technologies. Both brokerage firms noted that established IT Services companies are ideally poised to leverage AI efficiently. This collaboration is expected to grow markets rather than disturb current business models.
HSBC positive on software sector
HSBC Global has a positive outlook for the software sector, arguing that software vendors are actually set to flourish by embedding AI into their offerings rather than being replaced by it.
Flawed ‘AI vs Software’ debate
HSBC said that the narrative that AI will replace software is “illogical”. It sees software as an execution machine and AI as a learning algorithm. The two are stronger when working together. The software sector is seen as the best-positioned industry to deploy AI, which will significantly expand Total Addressable Markets (TAMs).
Within enterprise applications, the brokerage expects AI to be subordinate to the overall software platform, acting as intelligent agents domesticated within the application stack to handle specific high-value tasks.
Incumbent Advantage
Further, HSBC said that the current software vendors are the parties best suited to use AI to generate software. This is due to their existing domain expertise, robust sales channels, trusted customer relationships, and the difficulty of displacing established incumbents.
JP Morgan on IT services: ‘Tech World Plumbers’
JP Morgan defended the Indian IT Services sector, saying that the reality is that even as AI tools like Claude generate massive volumes of code, the complexity of enterprise integration remains a human-led endeavour. IT firms remain the “Plumbers of the Tech World.”
Automated agents frequently produce “AI slop”—code that is syntactically correct but functionally inadequate for complex corporate environments. IT services firms are essential for rewriting software on a bespoke basis to ensure stability and security.
The edge that Indian IT services have
AI models lack the nuanced, historical understanding of a corporation’s internal culture, idiosyncratic workflows, and legacy interdependencies. This “tribal context” is the proprietary edge that firms like Tata Consultancy Services and Infosys provide.
Any transition to agentic software requires significant “services plumbing” to ensure the new AI-generated streams work within the existing enterprise context without disrupting core operations.
To conclude, HSBC and JP Morgan believe that AI will enhance rather than replace existing software and IT services. HSBC views AI as a domesticated agent within software platforms, while JP Morgan identifies IT firms as essential “plumbers” for complex enterprise integration.