AI Fear Triggers IT Bloodbath: Why Infosys, TCS & Wipro Crashed After Anthropic’s Big Move

Indian IT stocks recorded one of their steepest single-day declines in recent months, erasing nearly ₹1.9 lakh crore in market capitalisation, after a new artificial intelligence product launch in the US intensified concerns about automation and margin pressure across the global technology services industry.

Shares of Infosys, Tata Consultancy Services, Wipro, HCL Technologies, LTIMindtree, Coforge and Persistent Systems fell sharply in early trade, pulling the Sensex lower and pushing the Nifty IT index below the ₹30 lakh crore valuation mark.

The sell-off was triggered by an announcement from Anthropic, which unveiled a new workplace productivity tool designed for corporate legal teams. The tool is capable of reviewing contracts, managing non-disclosure agreements, handling compliance workflows, drafting legal briefs and generating standardised responses. Investors interpreted the launch as a signal that artificial intelligence is advancing rapidly into areas traditionally serviced by large IT and outsourcing firms.

Market participants fear that as AI tools become more sophisticated, they could reduce the need for large technology service teams, weaken pricing power and compress margins for companies dependent on manpower-led revenue models. This concern led to heavy selling across the IT pack, with Infosys and Mphasis falling over 7%, TCS declining nearly 7%, HCL Tech dropping more than 4% and Wipro losing close to 4%.

The negative sentiment was reinforced by weakness in US markets, where technology stocks came under pressure. The Nasdaq Composite fell over 1.4%, wiping out close to $300 billion in market value, while the S&P 500 also ended lower. Major global technology stocks, including Nvidia, Microsoft, Alphabet and Amazon, declined amid growing uncertainty over how AI-driven competition could reshape the software and services landscape.

Adding to the pressure, global brokerage Jefferies reduced its allocation to the IT sector in its India model portfolio, citing rising uncertainty around earnings visibility. The IT sector’s weight now stands significantly below its representation in the MSCI India index. This comes at a time when foreign portfolio investors have already withdrawn around $34 billion from Indian equities over the past 16 months, with IT stocks among the worst affected.

Anthropic clarified that its newly launched tool is not intended to replace legal professionals and that AI-generated outputs should be reviewed by licensed experts. The company also announced additional open-source tools aimed at automating tasks across sales, customer service and other professional functions. Despite these clarifications, investor concerns remained focused on the broader implications of rapid AI adoption rather than the specific intent behind the product.

The sharp correction highlights a growing reassessment of the Indian IT sector’s long-term business model. While technology services companies are increasingly investing in AI capabilities, markets are demanding clearer evidence that these tools will protect margins and sustain growth rather than disrupt existing revenue streams. The episode underscores how quickly sentiment can shift as artificial intelligence moves from experimentation to enterprise-scale deployment.