As experts differ on AI trajectory, markets can only reflect collective expectations of the present

In another, engineers wonder whether they are training the very systems that might one day replace them. Both views can be true. And that is precisely the problem for investors trying to price the impact of artificial intelligence. Markets, after all, do not struggle with change so much as with uncertainty.

The current AI moment is unusual not because technological disruption is new, but because the distribution of outcomes is unusually wide. Investors may therefore be making a familiar error. They are overestimating the threat to some firms while underestimating the risks to others, particularly in sectors like Indian IT services that sit at the intersection of global enterprise demand and rapidly evolving technology.

Most visible gains

Start with the technology itself. The most visible gains from AI have come in coding. Tools that can generate, debug, and optimise code are improving quickly, particularly for routine and well-scoped tasks. For firms whose business model relies on large pools of engineers billing by the hour, this raises an obvious concern. If developers can produce more output with fewer people, the arithmetic of headcount-driven revenue begins to shift.

This is no longer theoretical. Early enterprise deployments suggest that AI-assisted coding can deliver meaningful productivity gains, especially for standardised work. For Indian IT services firms, which have historically thrived on scale, process discipline, and labour arbitrage, this creates a structural tension.

The very efficiency gains they help clients achieve could reduce demand for their own traditional services over time.

Yet it would be a mistake to stop the analysis there. Coding is different from software delivery. Writing code is only one part of a broader process that includes understanding business requirements, integrating with legacy systems, ensuring security and compliance, and managing change across large organisations.

AI can help with many of these tasks, but it does not end them. This is where the story becomes more nuanced. If AI lowers the cost of producing code, it may also increase the appetite for building software. Projects that were once considered too expensive or complex may become viable. In economic terms, a fall in the price of a key input can expand the size of the market rather than simply shrink it.

Paradoxical opportunity for Indian IT firms

For Indian IT services firms, this creates a paradoxical opportunity. Even as the demand for low-end coding work comes under pressure, the demand for higher-order services may rise. Enterprises adopting AI at scale will need partners who can integrate these systems into their workflows, ensure they operate reliably, and manage the risks associated with their use. The centre of gravity may shift from execution to orchestration.

This pattern is not entirely new. The adoption of earlier technologies often reduced the need for certain tasks while increasing the importance of others. Tools that automated parts of financial analysis did not eliminate finance roles, but they did change what those roles needed. Similarly, shifts in computing infrastructure to the cloud altered how IT functions ran, even as the need for oversight and coordination remained.

What makes AI different is the speed of the transition and the uncertainty about who captures the value. Leading AI labs are reporting rapid revenue growth, but they are also incurring enormous costs for computing infrastructure. If these costs stay high, the profits from AI may be concentrated among a small number of players with access to capital and scale. If, however, AI tools become more widely accessible, the benefits may diffuse, potentially putting pressure on margins across the industry.

Academic research offers a useful lens on this uncertainty. Economists have long noted that innovative technologies can fuel market optimism as investors extrapolate future growth. But there is also a countervailing effect. If investors believe that the eventual winners of a technological shift have not yet been created or listed, they may discount the value of existing firms. In such cases, markets can struggle even as technological progress accelerates. This logic is particularly relevant for Indian IT services firms. On one hand, they are seen as vulnerable to AI-driven automation. On the other, they have deep client relationships, domain expertise, and global delivery capabilities that are not easily replicated. The market’s challenge is to decide which of these forces will dominate, and over what time horizon.

The answer is unlikely to be uniform. Firms that stay anchored to labour-intensive models may face pressure as productivity gains reduce the need for large teams. Those that reposition themselves as partners in AI-led transformation may find new avenues for growth. The difference will lie not in access to the technology, which is increasingly commoditised, but in the ability to apply it effectively within complex organisational contexts.

This brings the discussion back to people, who are often overlooked in narratives about automation. Technology adoption in large enterprises depends not only on capability but also on trust, incentives, and organisational change. Systems need to be validated, processes need to be redesigned, and employees need to be trained. These are areas where experienced service providers can continue to play a vital role.

For engineers, this suggests a shift rather than a simple disappearance of work. Some roles and tasks are likely to shrink, particularly those that involve repetitive coding. Others will expand, especially those that require combining technical skills with domain understanding and oversight. The challenge will be adapting quickly enough to remain relevant.

For investors, the lesson is more subtle. In a world where even experts disagree on the trajectory of AI, markets can only reflect the collective expectations of the present. Prices will move as narratives change, sometimes sharply. Firms that appear threatened today may yet find ways to adapt, while those seen as beneficiaries may struggle to convert promise into profit.

If there is a single conclusion, it is that the impact of AI will depend less on what the technology can do in isolation and more on how firms choose to deploy it. For Indian IT services, the story is neither one of inevitable decline nor guaranteed growth, but of transition. And transitions, as business history repeatedly shows, are rarely priced correctly in real time.

The writer is a technology consultant and venture capitalist

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.