On Thursday, there was a storm in the tech sector in the Indian stock market, which gave sleepless nights to the investors. The Nifty IT index fell more than 4% to its lowest in four months, wiping out nearly ₹1.3 lakh crore in market value in just one day. Major stocks like TCS, Infosys, Wipro and HCL Tech fell by 4-5%. Is it just profit-booking, or is the growing dominance of Artificial Intelligence (AI) a warning sign for traditional IT companies?
Big fall in Nifty IT, TCS below ₹10 lakh crore. The market cap of Tata Consultancy Services (TCS), the country’s most valuable IT company, slipped below the psychologically important ₹10 lakh crore mark. The stock fell 4.5% to a 52-week low of ₹2,776 on the BSE. There was so much selling across the sector that the total market cap of Nifty IT fell to ₹27.6 lakh crore.
Sentiment changed due to ‘anthropic shock’
It is believed that this panic in the market is due to the launch of a new product by American AI startup Anthropic. The company has introduced an AI tool called Cloud Cowork, which can automatically perform many tasks like contract review, legal documentation and compliance. These are the same services from which IT companies are earning billions of rupees. International brokerage Jefferies has called it SaaSpocalypse, which means that AI is no longer a helper, but a competitor.
Pressure increased due to US data
The sector is under pressure not just because of AI, but also because of the strong data on jobs in the US. Expectations of an interest rate cut by the Federal Reserve soon have been tempered by the addition of 1.3 lakh new jobs last month and the unemployment rate falling to 4.3%. This is a negative sign for growth-sensitive tech stocks.
Is the sector facing an existential crisis?
Analysts believe that AI can make traditional software, testing and BPO services useless. According to some estimates, revenue may decline by up to 40%. However, some brokerages say that AI-native partnerships and new deals may change the picture in the coming 3-6 months.
