TCS, Infosys to Wipro: Indian IT stocks may have a Black Friday as US tech stocks slump on AI disruption fears

Infosys, Tata Consultancy Services, Wipro, HCL Technologies and other IT stocks are likely to remain under pressure on Friday after witnessing a sharp sell-off in the previous session. Concerns around Artificial Intelligence (AI)-led disruption and weak sentiment across global technology stocks continue to weigh on the sector.

The Nifty IT Index plunged 5.5% in the previous session, led by sharp declines in Coforge, Tech Mahindra, Oracle Financial Services Software and Infosys. The index has fallen nearly 7% over the past week and is down about 13% so far this year, reflecting sustained selling pressure.

Overnight weakness in global markets, particularly on Wall Street, is expected to further dent sentiment for Indian IT stocks. On the New York Stock Exchange, Infosys ADRs tumbled 9.84%, while Wipro ADRs declined 4.6%, mirroring the broader sell-off in US technology shares.

On Thursday, the Dow Jones Industrial Average declined 669.42 points, or 1.34%, to 49,451.98, while the S&P 500 dropped 108.71 points, or 1.57%, to 6,832.76. The Nasdaq Composite closed 469.32 points, or 2.03%, lower at 22,597.15.

The Philadelphia SE Semiconductor Index fell 1.6%, while most “Magnificent Seven” stocks ended in the red. Apple stock price plunged 5%, Nvidia stock price slipped 1.61%, AMD shares dropped 3.58%, Amazon share price fell 2.25%, Microsoft declined 0.63%, and Meta Platforms shed 2.82%.

Cognizant slumped 7.16%, Accenture declined 3.66%, while Cisco Systems plunged 12%.

Why are tech stocks under pressure?

US technology stocks have been facing sustained selling pressure amid growing concerns over whether massive AI investments will generate adequate returns. Investor worries have intensified after recent Big Tech earnings, which highlighted aggressive capital expenditure plans.

Amazon, Google, Meta and Microsoft are collectively expected to spend nearly $650 billion on AI-related investments as they race for dominance in the rapidly evolving technology landscape. The scale of spending has revived fears around margin pressure, uncertain monetisation timelines, and potential disruption across the global software and services ecosystem.

IT Stocks Outlook

The Nifty IT Index has declined over 13% in the past one month, significantly underperforming the Nifty 50, which has remained largely flat. Market participants cite fears of AI-led disruption to Indian IT services, alongside broader weakness in the global software and SaaS space.

Bears argue that AI could reduce the scope of traditional IT services by automating large parts of software development, potentially leading to revenue pressure. However, JPMorgan believes such assumptions may be overly simplistic.

“It is difficult to quantify the real impact of AI—both deflationary and inflationary—and the duration of any demand deflation at this stage of the cycle. However, it is overly simplistic to assume that AI can automatically generate enterprise-grade software and fully replace the value created by IT services firms,” JPMorgan said.

The brokerage added that IT services companies remain the “plumbers” of the technology ecosystem, noting that even if enterprise software and SaaS platforms are rewritten using AI agents, significant services support will be required to integrate, customise and deploy these solutions at scale.

According to JPMorgan’s reverse discounted cash flow (DCF) analysis, current stock prices imply terminal growth of around 4% with no near-term acceleration. Even if recent low-single-digit growth were to persist as terminal growth, the downside risk appears limited to about 10%. A more severe downside of over 30% would only materialise in a scenario of zero terminal growth, which the brokerage views as overly pessimistic given emerging AI-related work streams and the potential for cyclical recovery.

The firm also noted that free cash flow and dividend yields across large-cap IT stocks are at levels last seen during major market dislocation events such as the Global Financial Crisis and the COVID-19 pandemic. It recommends a barbell strategy, favouring deep-value large caps such as Infosys and TCS, alongside growth-oriented names.

Under a base-case scenario of gradual growth improvement from FY26 onwards—still below the long-term average of 7–8%—JPMorgan expects limited upside. It estimates 10-year revenue CAGR of 4.3% for TCS, 4.9% for Infosys and 5.9% for HCL Technologies, implying potential upside of 1%, 8% and 1%, respectively.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.