Today, neither any big fall nor any big rise has been seen in the Indian stock market, but there has been a big decline in one sector, the IT sector. The reason for this is not economic data, but the progress in Artificial Intelligence (AI). As the world realized that AI is no longer just a helpful tool but is gaining the ability to handle entire tasks, IT sector stocks came under pressure. Even the big IT companies of India could not escape this shock, and in no time the value of more than ₹ 2 lakh crore was wiped out from the market.
The country’s largest software company Tata Consultancy Services (TCS) suffered the most loss. The fall in its shares reduced its market cap by about ₹70,481 crore. This was followed by Infosys and HCL Technologies, which suffered a loss of about ₹54,011 crore due to selling by investors. HCL Technologies also suffered a big loss, registering a loss of about ₹26,811 crore. Mid-cap and other IT companies were no better—LTIMindtree lost about ₹14,276 crore, Wipro lost about ₹10,907 crore and Tech Mahindra lost ₹10,533 crore in market cap.
Anthropic AI shook the confidence of companies
The roots of this turmoil were in America. As Anthropic AI introduced its new office automation and productivity tools, investors began to fear what would happen to traditional software and outsourcing models. The company has added an automation layer to its enterprise AI assistant that can handle the entire business workflow. This raises the question of whether companies in the future will need as many IT services and custom software as they do today.
The effect of this fear was also visible in the global markets. In the US, Goldman Sachs’ basket of software stocks fell nearly 6 percent in a single day, its biggest decline since April. An index of financial services companies fell nearly 7 percent. Interestingly, this selling had started even before the US market opened. Shares such as Experian, RELX and London Stock Exchange Group suddenly fell after the information was posted on Anthropic’s website, according to traders. Investors feared that if AI started making decisions and completing processes on its own, the usefulness of many existing software companies could be reduced.
How much impact will this have on the Asian tech sector?
However, the Asian tech sector remained largely stable as the focus remained on hardware and chip makers that are benefiting from AI investments. In contrast, in North America, stocks like Thomson Reuters and LegalZoom were the biggest losers, leading the iShares Expanded Tech-Software Sector ETF down about 4.6 percent. This ETF has been falling for six consecutive sessions and in January it recorded a huge decline of 15 percent, which is considered to be the worst since 2008.