AI fears wipe out $50 billion from Indian IT stocks in February

• The sell-off was triggered by Anthropic's launch of an AI tool in January, intensifying concerns that generative AI could reduce demand for traditional IT services
• J.P. Morgan noted investor worries that Indian IT firms may miss growth targets as clients reallocate spending toward AI, though the firm argued it's 'overly simplistic' to assume AI can replace enterprise-grade software services
• Industry leaders dropped on Friday: Tata Consultancy Services fell 2.4%, Infosys declined 2.2%, and HCLTech lost 1.2%, contributing to the broader market correction

Summary: AI Fears Wipe Out $50 Billion from Indian IT Stocks in February

Indian IT stocks experienced a severe sell-off in February, erasing $50 billion in market value amid growing concerns about artificial intelligence disrupting the country's $283 billion IT services industry. The Nifty IT index plunged as much as 5.2% on Friday, February 13, before recovering to 1.7% losses by midday. For the week, the index dropped 9.4%—its steepest decline since early March 2020 during the COVID-19 market crash.

Key Drivers:

The sell-off intensified following Wall Street's tech-led decline and was triggered by Anthropic's AI tool launch last month, which sparked fears that generative AI adoption could fundamentally upend India's IT services sector. Major companies affected include Tata Consultancy Services (down 2.4%), Infosys (down 2.2%), and HCLTech (down 1.2%).

Market Concerns:

J.P. Morgan analysts noted investor worries that Indian IT firms may miss growth targets as clients reallocate spending toward AI solutions. However, the brokerage cautioned against oversimplification, arguing that IT services companies remain essential "plumbers in the tech world" for implementing enterprise-grade solutions.

Expert Perspective:

Sat Duhra from Henderson Far East Income suggested Indian IT companies haven't effectively communicated how they can capitalize on AI opportunities rather than be threatened by them. Analysts maintain that enterprise software implementation will still require significant IT services expertise despite AI automation.

The decline reflects broader uncertainty about how traditional IT services providers will adapt to rapid AI transformation while maintaining margins and growth trajectories.