IT stocks fall up to 7%: How big a threat is Anthropic’s AI tool for Indian IT firms? Here’s what analysts say

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The Nifty IT index was down more than 6%, on track for its worst day since March 2020. Infosys, LTI Mindtree and Mphasis shares plunged more than 7% each.

Indian IT stocks plunged over 6 percent after Anthropic launched a legal AI tool
Analysts warn of AI-driven disruption but see long-term resilience for IT firms
AI adoption may shift IT billing from effort-based to outcome-based models

The shares of Indian IT companies crashed on February 4, after Anthropic’s launch of a legal AI tool retriggered concerns around rising competition. Analysts have cautioned investors of a possible structural disruption, but highlighted the silver lining behind the AI threat.

The Indian IT companies are accompanying global peers, with Wall Street closing in the deep red earlier yesterday. The Nifty IT index was down more than 6 percent, on track for its worst day since March 2020. Infosys, LTI Mindtree and Mphasis shares plunged more than 7 percent each.

“The rally fuelled by the US-India trade deal will face hurdles to sustain. The IT selloff in the US yesterday will drag the Indian IT index, too, constraining the rally in the Indian market. Since valuations continue to be high there is no fundamental support for a sustained rally,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Why are IT stocks plunging today?

Wall Street ended yesterday’s session sharply lower as investors remained concerned that AI was creating more competition for software makers, after Anthropic’s launch of a legal tool for its Claude AI chatbot.

AI developer Anthropic launched plug-ins for its Claude Cowork agent last week that can automate tasks across legal, sales, marketing and data analysis. The move has triggered worries of an impending AI-fueled disruption of the data and professional services industry, which were once seen as major beneficiaries of the AI era, according to traders and analysts.

“Anthropic launched new capabilities for its Cowork to the legal space, heightening competition,” Morgan Stanley analysts including Toni Kaplan wrote in a note on Thomson Reuters, as reported by Bloomberg. “We view this as a sign of intensifying competition, and thus a potential negative,” they said.

What lies ahead?

The sharp correction in the Nifty IT index needs to be viewed through the lens of structural disruption rather than just cyclical weakness, said Bhavik Joshi, Business Head, INVasset PMS. “Recent commentary from global enterprise technology leaders highlights a shift that markets are still in the process of digesting: AI is no longer augmenting services, it is beginning to replace large portions of traditional, labor-intensive workflows,” he said.

“The significance of platforms now deploying AI-driven systems capable of executing complex SAP migrations and enterprise transformations in weeks—work that previously required years of human-led effort—cannot be overstated. This is not incremental automation; it represents a fundamental compression of time, cost, and manpower across core enterprise processes,” the analyst explained.

This would create near-term anxiety for service-heavy IT models built on long execution cycles and linear headcount growth, Joshi said.

Courtsey To : Moneycontrol