Indian IT stocks recorded their worst weekly performance in more than ten months in February, with fears surrounding artificial intelligence contributing to an estimated $50 billion loss in market capitalization. The sell-off accelerated after tech startup Anthropic launched a generative AI tool, raising concerns that rapid adoption of AI could disrupt India’s $283 billion IT services sector. Analysts observed that the sector’s reaction reflected investor anxiety over potential missed growth targets and the possibility that clients may shift spending toward AI-driven solutions.
During the week, the Nifty IT index slid 8.2 percent, marking its steepest decline since April 2025. Stocks of leading firms led the drop, with Tata Consultancy Services down 2.1 percent, Infosys losing 1.2 percent, and HCLTech slipping 1.4 percent. Despite the downturn, Friday’s mid-session recovery showed some buying interest as investors responded to lower valuations. Portfolio manager Sat Duhra noted that IT companies may not have fully communicated how AI could present growth opportunities rather than threats, leaving markets to overreact to headlines.
JP Morgan analysts highlighted that assumptions about AI replacing IT services are overly simplistic. They emphasized that enterprise-grade software development and customized solutions still require human oversight and significant services infrastructure. Even as AI becomes more integrated into workflows, IT services companies continue to play a critical role in maintaining enterprise operations and implementing solutions effectively. Investors reacting to short-term AI fears may not be fully considering the ongoing relevance and adaptability of these firms.
Despite the recent volatility, industry experts suggest that Indian IT companies retain long-term potential. The sector is likely to adjust business models to incorporate AI while continuing to deliver bespoke solutions that require expertise beyond AI automation. The February sell-off underscores both the sensitivity of the market to technological disruption and the importance of clear communication about AI adoption strategies. Analysts recommend measured optimism, noting that IT companies remain central to the global technology ecosystem even as AI tools transform client demands.
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