IT stocks tumble on OpenAI's push into AI adoption

ET BureauLast Updated: May 13, 2026, 05:33:00 AM IST

Synopsis

Indian IT stocks experienced a significant downturn on Tuesday, with the Nifty IT index plummeting 3.7% to a three-year low. This decline was triggered by OpenAI's substantial investment in AI adoption, raising concerns about its impact on traditional software services business models.

Mumbai: Information Technology stocks cracked on Tuesday with the Nifty IT index tumbling 3.7% at 28,234.9 to its lowest closing level in three years after OpenAI's fresh investments to enhance AI adoption by companies soured investor sentiment in an already weak market.

"Open AI's investment in the new company signals that AI-led companies will also embed the products in other companies, which threatens Indian IT companies, which were banking on the implementation of AI services," said Dharmesh Kant, head of research, Cholamandalam Securities.

Agencies

OpenAI said on Monday it is setting up a company with more than $4 billion in early investment to help entities build and deploy artificial intelligence systems, ramping up pressure on traditional software services business models.

Nifty IT index's drop on Tuesday is the highest single-day fall since April 24. Benchmark Nifty fell 1.8%.

All ten index constituents declined on Tuesday. LTM slumped 4.8%. Tech Mahindra and Persistent Systems dropped close to 4.5%. Tata Consultancy Services, HCL Technologies and Coforge declined around 4% each.

The outlook for IT stocks remains dicey as it grapples with existing concerns and newer headwinds on account of increased AI adoption, which could jeopardise their earnings trajectory further, said Gaurav Sharma, head of research, Globe Capital.

"The midcap IT names that derive most of their revenue from BFSI like Coforge and Mphasis, are the preferred picks in the sector," said Sharma. "These names could offer some opportunities in the next couple of years once the dust settles."

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