IT stocks plunge as US jobs data heightens AI disruption fears
IT stocks plunge as US jobs data heightens AI disruption fears
Indian IT stocks slide on stronger US jobs data and growing AI disruption worries, pushing the Nifty IT index to fresh lows.
Mumbai: Indian software services stocks cracked under a fresh bout of selling on Thursday, with the Nifty IT index tumbling more than 5% for the second time in less than 10 days as unexpectedly strong US jobs data for January added to concerns about how AI could disrupt the sector. The NSE IT benchmark fell 5.5%, closing at a 10-month low, with all 10 constituents ending between 4% and 7% lower. Coforge slid 6.6%, followed by Tech Mahindra, Oracle Financial Services Software, LTIMindtree and Infosys, which fell around 6-6.4%. Thursday's sell-off wiped out ₹1.56 lakh crore from the Nifty IT index.
US January job data showed a robust labor market, suggesting the Federal Reserve might hold rates higher for longer. Lower interest rates typically lift demand for IT services, but investors are more focused on AI's rapid advancement and its potential to disrupt traditional outsourcing and software delivery models.
Industry watchers say the sector is trading at premium valuations of 20-30 times earnings, despite near-term revenue growth of 2-4%. The AI narrative has intensified fears that automation could erode margins and shelf life of traditional business models.
Analysts note this is a structural transition rather than a one-off sell-off. Margins remain under pressure and traditional service models face competition from AI-led software deployment, but balance sheets and cash reserves are still strong, limiting downside in the near term. Markets have also reacted to earlier AI headlines, such as open announcements in the AI space, which previously triggered significant stock moves.
Investors will be watching for clearer signs of business-model stabilization and for any concrete AI adoption milestones in enterprise software. For now, the mood is cautious, with traders bracing for more volatility as the AI story unfolds.
