India's IT shares near three‑year low as OpenAI move revives AI fears
India’s IT sector shares dropped to a three-year low on May 12, driven by investor concerns over AI competition after OpenAI announced a $4 billion venture to embed AI solutions in enterprises. The Nifty IT index fell 3.6%, with major firms like TCS, Infosys, and Wipro declining 2.5%-4%, while HSBC warned AI spending could reduce demand for traditional IT services, exacerbating earnings shortfalls and sector-wide declines of 25.4% in 2026.
India’s IT sector faced its worst downturn in three years on May 12, as shares plummeted amid renewed fears that artificial intelligence would disrupt demand for traditional services. The Nifty IT index dropped 3.6% to its lowest level since May 2023, with Tata Consultancy Services (TCS), Infosys, HCL Technologies, and Wipro each falling between 2.5% and 4%. Analysts at HSBC attributed the decline to weak earnings in the March quarter and concerns that global AI investment could ‘crowd out’ demand for legacy IT services. The downturn follows OpenAI’s May 11 announcement of a new $4 billion venture aimed at embedding AI engineers into businesses to optimize AI adoption—a move seen as a direct threat to Indian IT firms reliant on enterprise consulting. HSBC noted that top Indian IT companies failed to meet earnings expectations for both the March quarter and fiscal year 2026-27, while global AI spending accelerates. The sector has already lost 25.4% of its value in 2026, outperforming only the broader Nifty 50’s 9.7% decline. TCS reported its first annual revenue decline since its 2004 IPO, with dollar revenue shrinking 0.5% year-over-year to $30 billion for the year ended March. Peers like HCL Tech echoed challenges, with CEO C Vijayakumar stating that converting deals required ‘25%-30% more effort’ due to uncertain demand visibility. Indian IT firms, which derive significant revenue from North America, remain vulnerable to U.S. economic trends and corporate tech spending shifts. The broader Indian market also struggled, with the rupee hitting a record low amid rising crude oil prices and stalled U.S.-Israel-Iran war negotiations. Investors showed little optimism for IT stocks unless global AI activity, cloud investments, and revenue growth slow significantly, according to HSBC. The sector’s struggles reflect broader anxieties over AI’s role in reshaping enterprise technology demand.
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