India’s world-beating software services industry has been rocked by a stock market rout, with almost $47 billion wiped off valuations in the last few weeks amid mounting fears that fast-evolving artificial-intelligence tools could dramatically slash the amount of work outsourced by global clients.

This week, the pressure intensified after brokerage firm Jefferies released a bearish report warning that six leading companies – Infosys, TCS, HCL, LTIMindtree, Mphasis and Hexaware Technologies – could be hit by AI’s rapidly advancing capabilities. Jefferies suggested shares could fall by up to 33 per cent.

India’s industry giants have borne much of the pain. TCS has fallen from a peak of Rs 3,220 to Rs 2,581, a decline of 18.27 per cent over the last month. Infosys has dropped 23.92 per cent in the same period.

Reuters calculates that the Indian software services sector has lost about $47 billion in February alone.

But is the market gloom justified? Could artificial intelligence truly shake the software services industry to its foundations by accomplishing in hours what once required weeks of labour from large teams of engineers?

Not necessarily, says Nandan Nilekani, who is preaching a more optimistic message to the world. He argues that AI could offer massive opportunities for companies like Infosys.

But these companies must overhaul themselves from top-to-bottom – both in the skills they offer and the way they work – if they want to grab those opportunities.

Says Nilekani: “This is a huge opportunity for us. Building applications has become so simple that very often you may just build or you may replace something you have. Fundamentally, it’s good for us because who is going to build it for them?”

Nilekani is talking up the doubters. But Anthropic’s CEO Dario Amodei is the new star of the tech world and he admits that many tasks will soon vanish but insists that many will remain – though it’s hard to predict which ones will vanish and which ones will survive.

Amodei told Fortune magazine: “AI is advancing too head-spinningly fast. I believe that these systems could change the world, fundamentally, within two years; in 10 years all bets are off.”

Now he’s slashing that timeframe even further, and says: “We might be six to 12 months away from when the model is doing most of … maybe all..of what a SWE [software engineer] does.”

The anxiety is not confined to India. A similar scenario to what’s unfolding in India is playing out at a global level.

In the US, even star companies like Salesforce – which provides cloud-based software that helps companies to connect with customers – has been forced to watch almost in disbelief as its share tumbled in the last month from near $230 to $185 or 18 per cent.

It’s the same story for other companies like Paypal and Thomson Reuters, which has fallen 49 per cent in the last year. Other US software stocks have also watched a sharp share slide.

Even IBM tumbled a massive 33.81 per cent on Monday after Anthropic said its Claude Code tool could modernise Cobol, a widely used programming language by IBM.

“Modernizing a Cobol system once required armies of consultants spending years mapping workflows….With AI teams can modernize their Cobol codebase in quarters instead of years,” the Anthropic blog announced, sending a chill through companies worldwide.

The common factor worldwide is the fear that much of the work these companies do will soon be automated and that tasks that took weeks will soon be completed in minutes.

The biggest scare has come in the last few weeks with Anthropic showing off its Claude Cowork that enables even non-software experts to finish complex software tasks with relative ease.

The impact has spread beyond traditional software firms. Smaller companies that specialise in generating legal documents, such as LegalZoom, and financial services platforms like Charles Schwab have also taken hits. Even US trucking companies have been affected by expectations that AI could streamline logistics and reduce labour requirements.

Azeem Azhar, who runs the AI newsletter Exponential View, told the Financial Times that AI tools have advanced so rapidly over the past year that they can now perform a wide range of tasks without human intervention that “would have been incomprehensible a year ago.”

At one point, losses on the S&P 500 software and services index in New York totalled about $800 billion before partially recovering.

In Europe, software services company Emam, which employs roughly 10,000 people across multiple offices in India, has fallen 33 per cent over the past year.

Is this simply a temporary market correction, or the beginning of a deeper structural transformation?

The evidence increasingly suggests that the global software services industry may be facing its most significant technological inflection point in decades.

Industry observers believe the future may resemble the consolidation-and-automation model already visible in other large global firms.

Pareekh Consulting CEO Pareekh Jain points to Salesforce as an example of how technology companies may restructure.

Salesforce acquired 11 companies in the last 11 months but also cut 5,000 jobs. Says Jain: “Same will happen with IT service providers. Firing and acquiring companies.”

One company already following this strategy is Accenture, which bought 39 companies in 2024 and nearly two dozen in 2025. During the June–August quarter, it also parted ways with 11,000 employees worldwide.

Jain believes independent service providers will increasingly move toward acquiring start-ups to position themselves as platforms for executing tasks rather than simply maintaining systems of record.”

On the optimistic side, the industry is also seeing strategic investment. Anthropic has opened an office in Bangalore and entered into a tie-up with Infosys.

The company is also in discussions with several other Indian firms. Five months after opening its India office, the country has already become one of its larger markets, accounting for about 6 per cent of global business.

On the jobs front, while AI is expected to replace some routine and repetitive work, history suggests that major technology shifts usually destroy some kinds of jobs but also create new ones.

Many analysts believe AI will create more opportunities in areas that depend on human judgement, creativity, safety checks and helping different systems work together, rather than simply wiping out work altogether.

The question then is how quickly and well societies can learn to work with AI and adapt to its fallout.