AI won’t kill Indian IT: JPMorgan calls market ‘extinction’ fears overstated

Artificial intelligence is unlikely to displace India's IT services industry and will instead generate new streams of work, according to a new report from JPMorgan Chase & Co., offering a counternarrative to the fears that have driven a brutal selloff in the sector.

The report from JP Morgan's Asia Pacific Equity Research team, titled "India IT Services: Looking through the AI fog 2 — Discounted for extinction? Div/FCF yields at crisis levels," argues that AI will become "another tool to address more work with the same budget" rather than a replacement for human expertise, comparing it to earlier technology shifts such as offshore labor, enterprise software, and cloud computing.

New Opportunities Emerge

The brokerage identifies several areas where AI is expected to create demand rather than destroy it. These include modernising decades-old legacy systems that were previously too expensive to overhaul, building AI agents for enterprise operations, ensuring trust and reliability in AI systems, and integrating physical AI solutions.

"IT firms remain the plumbers of the technology world," the report states. "It's overly simplistic to assume that AI can automatically generate enterprise-grade software and replace the value IT services firms create across the cycle."

JP Morgan noted that enterprise technology teams have historically been underfunded relative to business demands, making it likely that companies will use AI to expand output within constrained budgets rather than eliminate service providers altogether.

Market Context

The report arrives as India's IT sector reels from one of its worst selloffs in years. The Nifty IT index has fallen roughly 14% in February 2026 alone, with approximately ₹5.7 lakh crore in market capitalisation wiped out over eight trading sessions. Shares of major firms, including Tata Consultancy Services, Infosys, and Wipro, have been hit hard, with TCS's market cap falling below the ₹10 lakh crore mark for the first time since December 2020.

The selloff was triggered by investor concerns that rapid advances in AI, particularly after Anthropic's launch of its Claude CoWork automation tools, could compress revenue growth and shrink the addressable market for Indian IT firms.

JP Morgan acknowledged the market fears but described the assumption that AI would automatically replace IT services as "overly simplistic," adding that bespoke AI-driven software deployments will still require substantial services expertise to function in complex enterprise environments.