IT Stocks Tumble as AI Competition Fears Trigger Global Tech Selloff
Indian IT sector mirrors Wall Street weakness
Indian information technology stocks witnessed a sharp selloff in early trade on February 4, tracking a steep decline in global technology shares. Concerns that rapid advances in artificial intelligence could intensify competition and disrupt traditional software and services businesses rattled investor sentiment across markets.
The selloff dragged the Nifty IT index down nearly 6% to around 36,393.70 in early trading, making it the worst-performing sectoral index on the benchmarks. Heavyweight IT stocks were among the top losers on both the Sensex and the Nifty during the morning session.
Major IT stocks see deep cuts
Several frontline and mid-tier IT companies faced heavy selling pressure. Shares of Persistent Systems, LTI Mindtree, Coforge, and Infosys declined by more than 6% each in early trade. Other large-cap names such as Tata Consultancy Services, HCL Technologies, Tech Mahindra, and Mphasis were down close to 6%.
Wipro also slipped over 4%, while Info Edge, the parent company of a leading online recruitment platform, dropped nearly 5% amid renewed worries about job demand and spending in the technology services space.
What triggered today’s IT stock crash?
The sharp fall in Indian IT shares followed a weak overnight session on Wall Street, where technology stocks ended significantly lower. Investor concerns resurfaced after a leading artificial intelligence developer introduced new tools that expand the capabilities of its AI chatbot into professional domains such as legal work, sales, marketing, and data analysis.
Market participants fear that such developments could accelerate automation across knowledge-based services, increasing competition and putting pressure on traditional software and IT service providers. These sectors were earlier seen as long-term beneficiaries of the AI boom, but sentiment has now turned cautious.
Analysts believe the launch signals intensifying competition in areas that have historically driven revenue growth for software and IT services companies. This perception has led investors to reassess valuations, especially for firms trading at premium multiples.
Global tech stocks under pressure
The weakness was not limited to Indian markets. Several global technology heavyweights also saw notable declines. Shares of leading chipmakers and software giants fell between 1% and 3%, while enterprise software and digital services firms recorded losses of up to 7% in a single session.
The tech-heavy Nasdaq index declined over 1.4%, reflecting broad-based selling across the sector. The pullback came ahead of key earnings announcements from major global technology companies, adding to short-term volatility.
Outlook for Indian IT stocks
Market experts caution that Indian IT stocks may remain under pressure in the near term. High valuations, coupled with uncertainty around global technology spending and the disruptive impact of AI, could limit the scope for a sharp rebound.
Some strategists note that while artificial intelligence presents long-term opportunities, the transition phase may be challenging as clients reassess budgets and vendors adapt to new competitive dynamics. As a result, investors may prefer to stay selective and focus on companies with strong balance sheets, diversified revenue streams, and clear AI strategies.
For now, global cues and developments in the AI space are likely to continue driving sentiment in IT stocks, keeping volatility elevated.
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