Infosys, HCLTech Lead IT Selloff As Anthropic AI Shock Deepens; Jefferies Warns Of More Downside

IT stocks experienced a second day of decline on February 5th, triggered by anxieties surrounding the disruptive potential of Anthropic’s AI tools, particularly its new legal AI tool and 'Cowork' agent plug-ins. The Nifty IT index dropped nearly 1 percent, accumulating a 7 percent loss over the past two sessions. Companies like Infosys, HCL Technologies, and Mphasis led the decline, with losses ranging from 1 to 2 percent.

Investor concerns stem from the possibility that AI could intensify competition for traditional software companies, potentially eroding revenues from application services – a significant contributor (40-70%) to IT firms’ topline. Jefferies warns of “more pain ahead,” predicting that deflation in legacy service revenues may outweigh gains from new AI opportunities in the next one to two years. Morgan Stanley analysts and Art Hogan of B. Riley Wealth echoed these concerns, highlighting the broader impact on the software ecosystem.

Despite stable underlying fundamentals, market sentiment remains volatile as investors assess the impact of AI on demand and margins. Ajit Mishra of Religare Broking advises caution, suggesting investors avoid aggressive positioning until clearer signs of stability emerge.

(Source：News 18)