AI disruption fears trigger sharp selloff in Indian IT stocks, erasing over ₹2 lakh crore in value
Concerns that rapid advances in artificial intelligence could disrupt traditional IT services and software business models wiped out more than ₹2 lakh crore in market capitalisation from India’s top technology firms on February 4, as investors reacted to fresh signals of AI-driven automation.
The selloff intensified after US-based AI developer Anthropic launched new workplace productivity and automation tools, heightening worries that AI systems may increasingly handle complex enterprise workflows with limited human intervention.
Market participants said the reaction reflects a growing reassessment of how AI could affect demand for outsourced services, consulting and enterprise software customisation — key revenue drivers for Indian IT firms.
Heavyweights TCS and Infosys lead market-cap erosion
Tata Consultancy Services (TCS), India’s largest software exporter, recorded the steepest decline, with its market value falling by nearly ₹70,481 crore in a single session. Infosys followed with a drop of more than ₹54,000 crore in market capitalisation.
Other major firms also saw significant erosion:
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HCL Technologies lost about ₹26,800 crore
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Tech Mahindra shed around ₹10,500 crore
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Wipro also saw a decline of roughly ₹10,500 crore
The declines came amid broad-based selling across frontline IT counters, reflecting sector-wide sentiment rather than company-specific developments.
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Global tech rout adds to domestic pressure on IT shares
The domestic selloff mirrored a wider global retreat in technology and software stocks. A new AI automation tool unveiled by Anthropic PBC triggered what market data showed as a $285 billion decline across global software, financial services and asset management stocks on Tuesday.
In the United States:
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A Goldman Sachs basket of software stocks fell 6%, its biggest one-day drop since a tariff-led selloff in April
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An index tracking financial services firms declined nearly 7%
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The Nasdaq 100 Index fell as much as 2.4% intraday before trimming losses to around 1.6%
The negative momentum spilled over into Asian trading hours, influencing sentiment toward export-focused IT names in India.
Anthropic’s new AI tools raise questions about future demand for IT services
The latest bout of anxiety began after Anthropic expanded its enterprise AI assistant with an automation layer capable of handling entire business workflows. Investors interpreted the development as a sign that AI may start replacing portions of work currently outsourced to IT service providers.
“The concern is not just about productivity tools, but about automation of end-to-end workflows,” said a Mumbai-based technology analyst. “If AI systems can independently execute tasks, the need for manual intervention and even customised software layers could reduce.”
Anthropic’s approach of building its own AI models allows tighter control over deployment and faster scaling across enterprise use cases, placing it in more direct competition with specialised legal and professional AI platforms such as Harvey AI and Legora.
Here’s what happened today and why traders reacted
Traders reacted swiftly to a mix of global cues and sector-specific fears.
Key triggers included:
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Anthropic’s automation-focused AI release
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Sharp declines in US software stocks overnight
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Rising narrative around AI replacing human-led processes
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High foreign investor exposure in Indian IT stocks
Short-term traders moved to cut exposure in stocks perceived to be vulnerable to automation risk, accelerating intraday declines.
Broader technology sector shows mixed resilience
While software and IT services stocks came under pressure, parts of the global technology sector showed relative resilience. Asian tech markets are more heavily weighted toward hardware and semiconductor manufacturers, which are often seen as beneficiaries of AI investment cycles.
This divergence highlights how AI is creating winners and losers within the broader technology ecosystem. Companies supplying chips and computing infrastructure may benefit, while firms dependent on labour-intensive services face new questions.
What this means for investors and portfolios
For investors, the episode underscores how AI developments can quickly alter sector sentiment and valuations.
Potential portfolio implications include:
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Higher volatility in IT stocks
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Re-rating risks for traditional outsourcing models
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Greater focus on firms’ AI strategies and adaptability
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Rotation toward AI enablers rather than service providers
Long-term investors are likely to evaluate how effectively Indian IT firms integrate AI into their offerings rather than viewing AI solely as a threat.
What to watch next as AI reshapes market narratives
Market participants say the next phase will depend on how earnings outlooks evolve and whether clients actually reduce outsourcing budgets.
Key watchpoints include:
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Management commentary on AI’s revenue impact
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Client spending trends in digital and automation
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Adoption of AI-led services by IT firms themselves
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Global tech market stability
For now, the sharp erosion in market value shows that investors are recalibrating expectations in real time as AI capabilities expand.
Whether the current selloff proves temporary or marks a structural shift will likely depend on how the industry adapts to a rapidly changing technological landscape.
