When Anthropic launched Claude Cowork, it led to a massive selloff in IT stocks across the world, wiping around $285 billions of market capitalisation. Tech-heavy Nasdaq fell around 3% over the past two days, while the Indian Nifty Index fell to an intraday low of 8% in yesterday’s trade. The crash too wiped out around Rs 1.9 lakh crore of m-cap of the Indian IT companies.

Nifty IT has fallen 15.70% in the span of the year where AI giants are improving and launching new tools that has hastened workflow and saved time.

But the main catalyst to trigger a global reaction was Palantir’s recent earnings commentary, which suggested that that its artificial intelligence platform is beginning to replace not just labour-intensive IT work, but also certain third-party enterprise software. The company cited examples of clients moving away from traditional pay-per-seat software models and adopting AI-driven alternatives.

Palantir also highlighted how its AI tools were being used to accelerate complex SAP migration projects, reducing timelines from what traditionally took years to just weeks. That remark caught the market’s attention because enterprise resource planning implementation has historically been viewed as relatively insulated from automation.

According to a research note by Motilal Oswal Financial Services, these developments, combined with cautious guidance from global technology research firms, worsened investor sentiment and triggered a broad sell-off in technology, consulting, and outsourcing stocks, including Indian IT services companies.

Here's how the Indian IT services will get affected

Q: Why are Palantir and Anthropic being seen as particularly disruptive?

Palantir’s AI strategy is significant because it challenges two core revenue streams in enterprise technology. First, it attempts to replace or reduce reliance on traditional enterprise software by embedding AI-driven decision systems directly into client workflows. Second, it compresses implementation timelines for complex digital transformation projects.

Anthropic’s Cowork tool, on the other hand, pushes AI into executing structured professional tasks. Instead of functioning as a support assistant, it can perform research, documentation, and coding-related activities through integrated plugins. Together, these developments suggest AI is moving beyond productivity enhancement into execution and workflow ownership, which directly overlaps with outsourcing services.

Q: Which parts of IT services are most exposed to AI-driven disruption?

Before Palantir’s comments on ERP transformation, Motilal Oswal Financial Services estimated that nearly 30–40% of IT services revenues were vulnerable to AI-led productivity gains. These risks were largely concentrated in application development, maintenance, and testing services.

The brokerage estimates that productivity improvements of 30–50% in these low-level functions could potentially eliminate 9–12% of industry revenues over a three-to-four-year period. This translates to an annual growth impact of roughly 2%.

However, if AI begins to meaningfully disrupt ERP migration and third-party enterprise software implementation — segments that account for roughly 10–15% of industry revenues — the revenue risk could expand further. The report describes this possibility as incrementally negative for the sector.

Q: Is AI disruption entirely negative for the industry, or could it create new opportunities?

The picture is not entirely one-sided. Motilal Oswal notes that similar disruptions have occurred before. Infrastructure management services faced pressure when cloud computing gained traction, and business process outsourcing was disrupted during earlier automation cycles. In both cases, the industry eventually found new growth avenues.

The firm argues that AI adoption will require enterprises to modernise legacy technology systems, creating implementation opportunities for IT vendors. Over time, AI-native companies may also rely on traditional IT service providers as channel partners because of their deep enterprise relationships and domain expertise.

For instance, strategic partnerships are already emerging, with consulting firms such as Accenture working alongside AI platform providers. This evolving ecosystem will be a key trend to monitor over the next year.

 Q: What should investors and industry watchers monitor going forward?

According to Motilal Oswal, the next three to six months will be crucial in assessing whether AI partnerships translate into meaningful deal wins for IT service providers. The brokerage expects AI-led service deals to pick up gradually through mid-2026, initially in the form of smaller, short-duration contracts.

The firm also suggests that the current stock market reaction reflects a reset in sector sentiment rather than a definitive shift in business fundamentals. The pace at which AI-native firms integrate with traditional outsourcing vendors could determine whether the disruption becomes a long-term threat or a growth opportunity.

Q: How has the industry reacted?

Sridhar Vembu, founder of Zoho, in an X (formerly Twitter), said that The stock market is becoming very negative about the prospects of SaaS companies in the AI-assisted Code era. "Well before the AI revolution, I have said SaaS industry is ripe for consolidation. An industry that spends vastly more on sales and marketing than on engineering and product development was always vulnerable. The venture capital bubble and then the stock market bubble funded a fundamentally flawed, unsustainable model for too long. AI is the pin that is popping this inflated balloon," the post read.

"Can Zoho survive the AI wave? It depends on our ability to adapt. I always ask our employees to calmly contemplate our death. When we accept that possibility, we become more fearless and that is when we can calmly chart our course," Vembu said.