AI fears wipe Rs 6 lakh crore off IT stocks; how TCS, Infosys and other tech firms are shifting strategy

IT stocks have taken a massive hit, losing over Rs 6 lakh crore in market value across eight sessions, with the Nifty IT index dropping more than 8 per cent. The sell-off stems from fears that AI could automate core IT services like application development, maintenance, and testing – the backbone of Indian IT companies’ outsourcing model. However, major software companies are actively working to adapt their business models and convince stakeholders that AI won’t eliminate their services entirely.The situation isn’t entirely negative, according to recent research. JP Morgan belives that AI is “discounted for extinction” , but will create new opportunities in areas like modernising old systems and building AI trust services, as quoted by ET.HSBC pointed out that AI typically needs to work within existing business systems, where IT companies still play a crucial role. “In large organisations, AI is unlikely to run as a standalone “magic box”. It usually has to work with data systems, access permissions, audit checks and risk controls, areas where large IT vendors and enterprise platforms still matter,” it said.The main concern for investors is whether AI will cut into IT companies’ profits by reducing the workforce needed for projects. Motilal Oswal estimated 9-12 per cent of sector revenue could be lost over 3-4 years due to AI-driven productivity gains.India’s top IT firms are responding with practical changes. They’re using AI coding assistants and automation tools across their operations. As Sandeep Gogia from Equirus Capital said, “They’re training their manpower on AI tools and AI-assisted coding, and learning to work with AI agents, either their own or through partners.”Among the major players, TCS has invested in a 1 GW AI data center and trained over 350,000 employees in AI skills. Infosys is focusing on its Topaz platform and has developed more than 100 AI agents for specific business tasks. HCL Tech is differentiating itself through engineering-focused AI solutions, while Wipro has committed $1 billion to AI development over three years.The key challenge isn’t whether companies will use AI, but rather who will benefit most financially. IT companies are trying to move up the value chain, offering more sophisticated services while using AI to maintain their profit margins.As Vinit Bolinjkar from Ventura said, there’s a shift happening “from a headcount-led model to an outcome-led, IP-led model.”