Technology shares in major markets like the United States, China, Hong Kong, and South Korea have experienced a powerful surge this year, fueled primarily by the artificial intelligence (AI) revolution. This rally has propelled their indices to new heights. In contrast, the Indian stock market has not enjoyed a similar boost, largely because it lacks a strong cohort of pure-play AI companies. Notably, Christopher Wood from Jefferies has even labeled Indian IT stocks as a "reverse AI trade."
The Global AI Bubble and India's Emerging Opportunity
Market analysts observe that signs of an AI bubble forming in these advanced global markets, which could dampen their appeal, might actually benefit emerging economies like India. They predict that by 2026, this could redirect significant capital flows into Indian markets. Despite the current lag, a substantial transformation is underway within India's own technology sector.
Indian IT giants are now aggressively pivoting towards AI. Tata Consultancy Services (TCS), in a recent investor meeting, boldly declared its ambition to become the world's largest AI-driven technology services firm. The company has already generated an annualised $1.5 billion in revenue from AI services, marking a strong 16.3% growth from the previous quarter. Similarly, HCL Technologies reported standalone AI revenue exceeding $100 million in the second quarter of the fiscal year 2026. Infosys is actively running more than 225 generative AI programs on its dedicated Topaz platform.
Niche Players and Massive Investments Shape India's AI Landscape
Beyond the industry leaders, several smaller and mid-sized firms are carving out specialised niches in the AI domain. Companies like Tata Elxsi, Persistent Systems, Coforge, and L&T Technology Services are emerging as focused players. Harshal Dasani, Business Head at INVAsset PMS, highlighted that Tata Elxsi excels in applied AI for automotive software, while L&T Tech and Cyient benefit from AI in industrial engineering and aerospace. He also noted Affle India's focus on data-driven consumer intelligence and ad-tech, and Bosch as a long-term beneficiary through industrial AI applications.
The momentum is backed by substantial financial commitments. According to the Stanford AI Index 2025, India ranks among the top five nations globally for new companies attracting AI investment. Tech behemoths Amazon and Microsoft have together pledged over $50 billion in investments for India, sharply focusing on AI and creating vast opportunities for local firms.
Revenue Growth and Stocks to Watch in the Indian AI Race
Dhanshree Jadhav, Technology Services Analyst at Choice Institutional Equities, points out that AI-led investments are starting to show qualitative results. "Revenue growth is increasingly outpacing headcount growth, indicating rising non-linearity driven by productivity gains from AI platforms and automation," she said. She added that generative AI projects are moving beyond pilot stages to full-scale deployments, improving deal sizes and revenue visibility for IT vendors.
Looking forward, demand for AI-led technology is expected to stay strong, supported by rising investments in data centres and AI hardware. On stock preferences, Jadhav believes TCS and Infosys are structurally ahead of peers in monetising AI, thanks to their early and large-scale investments. She praised TCS's WisdomNext and Ignio platforms, and Infosys's Topaz for industrialising AI deployment. In the tier-II category, she favours Coforge for its QuasarAI and Forge-X platforms.
Harshal Dasani's long-term picks among listed companies include TCS, Persistent Systems, Tata Elxsi, and Oracle Financial Services Software (OFSS). As the global AI narrative evolves, India's concerted push, marked by billion-dollar revenues and even bigger investments, positions its tech sector for a potentially transformative phase.
