AI disruption concerns: Nifty IT tumbles 5,450 pts in seven days; what analysts say 

The ongoing correction in IT stocks has sent Nifty IT tumbling 14% or 5,450 pts in seven trading sessions. The correction started on February 4 when shares of Infosys, Wipro, HCL Technologies, Tata Consultancy Services (TCS) and Tech Mahindra fell up to 7 per cent. The crash in IT stocks came after American Depository Receipts (ADRs) fell overnight as new AI tool by Anthropic sparked fears of an AI-led disruption. 

The negative sentiment in IT stocks from Anthropic AI is not over yet. In the current session, Tech Mahindra, Infosys, TCS, HCL Technologies and M&M shares were the top Sensex losers, falling up to 6% tracking an overnight crash in select American depository receipts (ADRs). 

In fact, the Nifty IT index crashed 1,935 pts or 5.51% to 33,160 today 

Infosys, Wipro and Cognizant ADRs slipped up to 5 per cent overnight.

Vinod Nair, Head of Research Geojit Investments said, "AI is creating a structural shift in Indian IT services by reducing timelines and automating tasks, putting pressure on the traditional headcount-based outsourcing model. Layoffs are likely in routine-heavy areas as fewer people will be needed to deliver the same outcomes. Even ERP implementation, as highlighted by Palantir’s recent focus, is now vulnerable to AI disruption. Clients are shifting toward outcome-based pricing. In the coming quarters, AI adoption could create headwinds for deal wins, potentially impacting topline, making close monitoring of deal flow essential to assess its real impact."

"A weak sentiment in the IT sector, along with lingering geopolitical tensions between the US and Iran, may influence investors to take a cautious approach in the near term, "added Nair. 

Ponmudi R, CEO of Enrich Money, a SEBI - registered online trading and wealth tech firm said, "The selloff was triggered by intensifying concerns around AI-led disruption and the potential impact on traditional outsourcing revenue models. Rapid advancements in enterprise-grade AI tools capable of automating coding, analytics, legal drafting, and business workflows are prompting investors to reassess long-term growth assumptions for labour-intensive IT services. Additionally, stronger-than-expected US jobs data reduced expectations of near-term Federal Reserve rate cuts, raising concerns that discretionary IT spending from US clients may remain subdued."