IT companies tumble on Anthropic shock; some feel its a short alarm

Shares of Information Technology companies tumbled on Wednesday, as the ripple effects of a heavy overnight sell-off in their US counterparts, sparked by the launch of Anthropic’s legal AI tool, reverberated across traditional software services stocks.

The Nifty IT index fell 5.9% on Wednesday, in its worst performance since the peak of the Covid selloff in March 2020, leading to a market cap erosion of ₹1.9 lakh crore in the Indian IT pack.

“The sell-off has been triggered by market concerns that Anthropic’s new automation tools could replace currently outsourced IT services, leading to margin pressure for Indian IT companies,” said Vinod Nair, head of Research, Geojit Investments.

The San Francisco-based AI company’s new tool — Claude Cowork, an open-source plugin, is designed to automate tasks across legal, sales, marketing and data analysis.

Nair said automation tools from companies like Anthropic are viewed as a challenge to traditional IT service models.
After the launch announcement, US-based stocks Accenture, Microsoft, Cognizant and Salesforce fell 310% while American Depository Receipts (ADRs) of Infosys and Wipro fell 5.6% and 4.8%, respectively, in the US on Tuesday.

At home, Infosys fell the most, down 7.4%, followed by TCS, which declined 7%. The rest of all stocks on the Nifty IT index were down 3.8-6%.

The benchmark Nifty ended 0.2% higher at 25,776.

Sagar Shetty, research analyst at StoxBox said Wednesday’s sell-off was largely a knee-jerk reaction.

“At this stage, unless we see a clear and material impact on revenues, we don’t see any immediate reason to worry about large-scale disruption to the industry,” he said.

Nifty IT index advanced 1.4% in Tuesday’s trading after the finalisation of the India-US trade deal. Though Indian IT companies were not directly impacted by the tariffs, caution over business demand in the US had weighed on sentiment.

SHORT-TERM WORRIES, LONG-TERM STABILITY
Nair said Indian IT stocks are experiencing sentiment-driven volatility amid concerns about AI disruption, though underlying fundamentals remain stable.

“At this stage, long-term investors may selectively accumulate high-quality IT names with strong client stickiness and solid balance sheets. It is important, however, to monitor deal win trends over the next few quarters to assess any impact from AI adoption,” he said.
Shetty also said while near-term volatility may persist, deal momentum remains healthy, and the longer-term outlook for software
services remains constructive.

“We remain positive on the adaptation capabilities of Indian IT players, as the revenue model shifts from headcount-led, timeand-material billing to an AI-driven, outcome-based model,” he said.

Shetty remains bullish on Infosys, HCL Tech, Coforge and Persistent, and sees dips as good buying opportunities.