In an unprecedented decline, shares of leading IT firms have lost up to one-fourth of their value in February over concerns about AI-led disruptions, particularly following the launch of Google-backed Anthropic’s new Claude AI security tool, which has added to uncertainty around the sector’s earnings outlook.
While the sectoral gauge -- the Nifty IT Index -- has plummeted 21% so far in February 2026, some of its constituents have seen a much larger fall. Shares of Coforge, which plummeted 5.2% on Tuesday, have declined 26% so far in February while LTIMindtree, which fell 6.4% on Tuesday is down 24.3%. Among the heavyweights, Tata Consultancy Services (TCS) has lost 17.4% of its value while HCL Tech and Infosys shares are down 21-22% so far this month.
As per estimates, IT companies have lost more than $54 billion in market value so far this month.
On Tuesday, the sell-off in IT stocks extended its pace with Nifty IT slipping to a multi-year low. The latest crash is attributed to a report by Citrini Research which outlined a scenario where Indian tech majors such as TCS and Infosys may see contract cancellations accelerating through 2027 as the marginal cost of AI coding agents collapses.
The report highlighted that India’s IT sector was largely built on the premise of cost-effectiveness but with artificial intelligence disrupting the coding business, the dependence on the Indian tech sector will shrink.
Global brokerage Jefferies has also turned cautious on India's IT services sector, warning that artificial intelligence could structurally alter business models and compress valuations. The global brokerage downgraded the TCS to Underperform and slashed the price target to Rs 2,350 (Last traded price: Rs 2,581). For Infosys, the price target was reduced to Rs 1,290 (LTP: Rs 1,280).
Sunny Agrawal, Head - Fundamental Research at SBI Securities, said that at present, the sector is out of favour. “While IT companies are expected to see productivity gains through AI, the primary concern remains growth. The bigger question is ramp-up of deals which is a key for growth. The sector may continue to underperform despite having attractive valuation. Investors shall concentrate on domestic story,” said Agrawal.
IT stocks, once seen as a major wealth creator, have given poor to negative returns in the last few years owing to prolonged recession and artificial intelligence (AI)-led disruption. In the last three years, Nifty IT has given a negative return of 1.5%, while in five years it has surged only 21%. Compared to this, India’s equity benchmark index - NSE Nifty50 - has gained 75% in five years.
Explaining the possible reason for the downturn, Sushovon Nayak, Research Analyst, Anand Rathi Institutional Equities, stated that post the COVID-driven run-up in 2021, Indian IT entered an elongated spending recession as enterprise clients shifted focus from large transformation programs to optimizing existing technology stacks, leading to cautious discretionary spend, slower deal conversions, and a weak growth outlook that compressed valuations.
Nayak added that a deteriorating global macro environment, marked by tariff-driven trade disruptions and geopolitical uncertainty, further pushed US and European clients to defer and right-shift large IT commitments.
“The post-ChatGPT era then added a structural fear on top of the cyclical weakness, with the most visible AI spend flowing into chips and cloud infrastructure, Indian IT services began to look increasingly left out from technology spending agenda, along with revenue deflation fears that GenAI will compress the traditional IT services work of ADM and Managed Services, adding on to the the sector's de-rating well beyond just cyclical concerns,” said Nayak.