IT stocks slide on AI fears, emerge as top market laggards

New Delhi: The Indian IT sector witnessed sharp selling pressure on Tuesday, with stocks falling up to 7 per cent amid rising concerns over the impact of artificial intelligence (AI) on existing business models.

The Nifty IT index declined more than 5 per cent during the day, hitting a 10-month low of 31,422.60 and extending losses for the fifth straight session. The fall marks the sector’s weakest run since March 2020. Despite the slump in IT stocks, the broader market remained firm, with the Nifty crossing 23,550 and the Sensex gaining 568 points.

All constituents of the IT index traded in the red, with midcap companies leading the decline. Coforge and Persistent Systems were among the worst hit, while heavyweight stocks such as TCS, Infosys, Wipro and HCLTech also posted notable losses. Other players, including LTIMindtree, Mphasis and Tech Mahindra, also ended lower.

Market participants attributed the sell-off to growing fears that generative AI could significantly disrupt core IT services such as application development, testing and maintenance, segments that account for a substantial share of industry revenues. The increasing adoption of automation tools is seen as a potential threat to traditional outsourcing demand.

Sentiment was further dented by comments from Nvidia CEO Jensen Huang, who highlighted the rapid growth of AI and projected massive revenue potential for next-generation AI platforms. His remarks reinforced expectations of a major technological shift that could reshape the global IT landscape.

In addition, continued selling by foreign institutional investors has weighed on the sector. FIIs offloaded nearly Rs 17,000 crore worth of IT stocks in February, taking their holdings to a four-year low.

While some analysts believe the correction offers attractive entry points, others caution that AI-led disruption could keep the sector under pressure in the near to medium term.