Indian IT Stocks Witness Sharp Decline Amid AI Competition Fears
Indian information technology stocks experienced a significant downturn during Wednesday's opening trade, with shares of major companies including Infosys, Wipro, HCL Technologies, Tata Consultancy Services (TCS), and Persistent Systems plunging dramatically. The sell-off dragged the benchmark Sensex down by more than 100 points, reflecting growing investor anxiety about the expanding influence of artificial intelligence on traditional software services.
Anthropic's Workplace Tools Trigger Market Concerns
The immediate catalyst for the decline emerged from concerns surrounding artificial intelligence's growing impact, which intensified following Anthropic's launch of new workplace productivity tools. The US-based AI startup, known for developing the Claude chatbot, introduced a product specifically aimed at corporate legal teams that can automate various legal tasks including contract review, non-disclosure agreement sorting, compliance process management, legal brief drafting, and standardized response generation.
This development has significantly deepened the cautious outlook on software stocks, as investors grow increasingly uneasy about rising competition and potential margin pressure resulting from rapid AI adoption. Market participants worry that as artificial intelligence solutions become more sophisticated and accessible, traditional technology firms may struggle to maintain their pricing power and protect profitability in an evolving landscape.
Global Technology Weakness Mirrors Indian Market Sentiment
The negative sentiment in Indian markets mirrored substantial weakness on Wall Street, where the technology-heavy Nasdaq Composite declined by 1.4 percent, erasing nearly $300 billion in market capitalization across the sector. This international correlation highlights how global technology trends increasingly influence domestic market movements.
In the United States, the S&P 500 declined 0.84 percent to settle at 6,917.81, while the Nasdaq Composite dropped 1.43 percent to 23,255.19. The Dow Jones Industrial Average proved relatively more stable, closing 0.34 percent lower at 49,240.99. Among major technology stocks, Nvidia and Microsoft fell by nearly 3 percent each, while Alphabet slid 1.2 percent ahead of its earnings announcement and Amazon slipped 1.8 percent before releasing quarterly results.
Brokerage Adjustments Reflect Changing Sector Outlook
International brokerage Jefferies revealed in a February 2 report that it has reduced its allocation to the information technology sector as part of a reshuffle of its India model portfolio. Following this revision, the IT sector now carries a weight of 5.6 in Jefferies' India portfolio, significantly below the 9.7 weighting assigned to the sector in the MSCI India index.
This guarded approach from institutional investors comes amid persistent foreign portfolio investor selling, with overseas funds having withdrawn approximately $34 billion from Indian equities over the last 16 months. During this period, IT stocks have faced some of the heaviest pressure as global investors reassess the sector's growth prospects in light of technological disruption.
Anthropic Clarifies Product Intent Amid Market Reaction
Addressing market concerns about its newly launched tools, Anthropic clarified that its plugin is not intended to offer legal advice. The company emphasized that "AI-generated analysis should be reviewed by licensed attorneys before being relied upon for legal decisions." In addition to the legal-oriented tool, Anthropic unveiled a series of open-source offerings designed to automate a wide spectrum of professional activities, ranging from sales functions to customer service operations.
Established in 2021, Anthropic was founded by chief executive Dario Amodei along with several former employees of OpenAI, the developer of ChatGPT. The company's rapid development and product launches have positioned it as a significant player in the competitive AI landscape, contributing to investor concerns about how emerging technologies might reshape traditional business models across multiple industries.
The substantial decline in Indian IT stocks represents more than a temporary market correction—it signals a fundamental reassessment of how artificial intelligence will transform the technology services sector. As automation capabilities expand beyond routine tasks to more complex professional functions, companies that have built their businesses on human-delivered services face increasing pressure to adapt their strategies and offerings.
