Infosys, Tata Consultancy Services (TCS), Wipro, HCL Technologies and other IT heavyweights are expected to stay under pressure on Friday after a steep sell-off in the previous session. Persistent concerns
over artificial intelligence (AI)-led disruption and weak global technology sentiment continue to weigh on the sector.
The Nifty IT index slumped 5.5% in the last session, dragged down by sharp declines in Coforge, Tech Mahindra, Oracle Financial Services Software and Infosys. The index has shed nearly 7% over the past week and is down around 13% so far this year, highlighting sustained selling pressure.
Overnight weakness in global markets, especially on Wall Street, is likely to further dampen sentiment. Infosys ADRs plunged 9.84% on the New York Stock Exchange, while Wipro ADRs fell 4.6%, tracking a broad-based sell-off in US technology stocks.
On Thursday, the Dow Jones Industrial Average dropped 669.42 points, or 1.34%, to 49,451.98. The S&P 500 declined 108.71 points, or 1.57%, to 6,832.76, while the Nasdaq Composite tumbled 469.32 points, or 2.03%, to 22,597.15.
The Philadelphia SE Semiconductor Index slipped 1.6%, and most of the “Magnificent Seven” stocks ended lower. Apple fell 5%, Nvidia declined 1.61%, AMD dropped 3.58%, Amazon lost 2.25%, Microsoft slipped 0.63%, and Meta Platforms fell 2.82%. Among IT services peers, Cognizant plunged 7.16%, Accenture dropped 3.66%, and Cisco Systems sank 12%.
Why tech stocks are under pressure
US technology stocks have faced sustained selling amid rising concerns over whether massive AI investments will deliver adequate returns. Investor anxiety has intensified following recent Big Tech earnings that highlighted aggressive capital expenditure plans.
Amazon, Google, Meta and Microsoft are collectively expected to invest nearly $650 billion in AI-related initiatives as they compete for dominance in the fast-evolving tech landscape. The scale of spending has reignited fears of margin pressure, uncertain monetisation timelines and potential disruption across the global software and services ecosystem.
IT stocks outlook
The Nifty IT index has fallen more than 13% in the past month, sharply underperforming the largely flat Nifty 50. Market participants cite fears that AI could disrupt traditional outsourcing and software services models, along with broader weakness in global software and SaaS stocks.
Some analysts argue that AI-driven automation could reduce demand for conventional IT services, potentially weighing on revenues. However, JPMorgan believes such concerns may be overstated.
“It is difficult to quantify the real impact of AI—both deflationary and inflationary—and the duration of any demand deflation at this stage of the cycle. However, it is overly simplistic to assume that AI can automatically generate enterprise-grade software and fully replace the value created by IT services firms,” the brokerage said.
JPMorgan described IT services companies as the “plumbers” of the technology ecosystem, noting that even if enterprise software and SaaS platforms are rebuilt using AI agents, significant services support will still be required for integration, customisation and large-scale deployment.
According to the brokerage’s reverse discounted cash flow (DCF) analysis, current valuations imply terminal growth of around 4% with no near-term acceleration. Even if low single-digit growth persists as terminal growth, the downside risk appears limited to roughly 10%. A sharper downside of over 30% would likely materialise only under a zero terminal growth scenario, which JPMorgan considers overly pessimistic given emerging AI-related opportunities and prospects of cyclical recovery.
The brokerage also pointed out that free cash flow and dividend yields for large-cap IT stocks are at levels last seen during major market disruptions such as the Global Financial Crisis and the COVID-19 pandemic. It recommends a barbell strategy, favouring deep-value large caps like Infosys and TCS alongside select growth-oriented names.
Under its base-case scenario of gradual growth recovery from FY26 onwards—still below the long-term average of 7–8%—JPMorgan sees limited upside. It projects a 10-year revenue CAGR of 4.3% for TCS, 4.9% for Infosys and 5.9% for HCL Technologies, implying potential upside of 1%, 8% and 1%, respectively.
