Rising debt among US technology giants and concerns over returns from artificial intelligence (AI) investments are prompting investors to reassess the AI trade, creating an opportunity for Indian IT services companies.
The global sell-off in AI stocks is putting Indian IT services companies in focus, as investors question the returns from massive AI infrastructure investments and look for alternatives to expensive technology stocks.
The shift towards Indian IT services companies was visible in October's market performance. According to Goldman Sachs Research, Indian IT services stocks outperformed the Nifty by 14 percentage points in October, while AI-enabler stocks underperformed the benchmark by 6 percentage points.
This marked a sharp reversal from the first nine months of 2026, when AI-enabler stocks had outperformed the Nifty by 76 percentage points. Goldman Sachs attributed the shift to investors moving away from AI-sensitive markets and towards other investment opportunities.
India also outperformed the broader Asia-Pacific region excluding Japan by 7 percentage points in October, making it one of the best-performing markets globally, the report said.
Adding to the positive outlook, Anand Rathi said Indian IT firms were well-positioned to benefit from the next phase of enterprise AI adoption because of their asset-light business models.
"Indian IT offers relatively asset-light exposure to the subsequent enterprise deployment cycle, supported by net-cash balance sheets, low capex intensity & strong cash conversion," the brokerage said.
The report argued that while AI infrastructure companies need substantial investments in computing capacity, Indian IT service providers can earn from helping businesses integrate AI models into existing systems, applications and workflows.
The concerns surrounding the AI investment cycle have intensified following a sharp rise in borrowing by some of the world's largest technology companies. According to a report by SBI Research, the combined debt of the seven largest US technology companies, known as the Magnificent Seven, rose nearly 45% to $578 billion by mid-2026, from around $399 billion in 2025.
The group includes Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. SBI Research also flagged substantial off-balance-sheet commitments as these companies continue to expand their AI infrastructure.
"Higher borrowing costs and rising Treasury yields could put pressure on their valuations by increasing the discount rate applied to future earnings," SBI Research said.
Using an equity duration approach, the report estimated that a rise in yields could put $1.67 trillion to $2 trillion of the group's combined market capitalisation at risk. The seven companies had a combined market value of around $23 trillion, according to the report.
The concerns come amid a broader correction in global technology stocks. The Nasdaq 100 fell more than 5.8% in October, putting over $2 trillion in market value at risk as investors questioned whether Big Tech's heavy AI spending would generate adequate returns.
