Shares of India’s top information technology services companies took another beating on Tuesday after artificial intelligence research giant OpenAI announced its entry into the software services business, raising concerns about their future in the AI era.
Shares of Tata Consultancy Services Ltd (TCS) fell 3.8%, while Infosys Ltd, HCL Technologies Ltd, Wipro Ltd and Tech Mahindra Ltd declined 3.1%, 4.1%, 3.6% and 4.4%, respectively, on Tuesday following OpenAI’s 11 May announcement of the OpenAI Deployment Company, a new joint venture formed with a consortium of 19 private equity and consulting firms, including TPG, Advent International, Bain Capital, and Brookfield Asset Management.
The unit will help OpenAI deploy AI tools into organizations’ operations—a role traditionally handled by Indian IT outsourcers.
Meanwhile, mid-caps also faced investor wrath, with shares of Coforge Ltd, Mphasis Ltd, Persistent Systems Ltd, Hexaware Technologies Ltd, Sonata Software Ltd, and Firstsource Solutions Ltd falling between 1% and 9%.
The Nifty IT Index was down 3.7%, while the Nifty50 was down over 1.8%.
The San Francisco-based AI giant would hire engineers to work at client locations and embed AI directly into their systems. This would bypass the need for tech outsourcers to do this work, raising questions about their relevance at a time when geopolitical uncertainties are already weighing on their growth.
“In connection with the OpenAI Deployment Company’s launch, OpenAI has agreed to acquire Tomoro, an applied AI consulting and engineering firm that helps enterprises turn AI into operational advantage. The acquisition will bring approximately 150 experienced Forward Deployed Engineers and Deployment Specialists to the OpenAI Deployment Company from day one,” said OpenAI in an 11 May statement.
A week ago, Anthropic also formed a joint venture with PE giants Blackstone, Hellman & Friedman, and Goldman Sachs to provide AI services.
“Putting Claude to work in an organization’s core operations takes hands-on engineering and deep familiarity with how each business runs. Systems integrators in the Claude Partner Network lead that work for the world’s largest enterprises today, and we are continuing to invest deeply in those partnerships as Claude reaches more customers. This new firm extends that delivery capacity further,” said Anthropic in a 4 May statement.
This entry into the software services space comes as AI firms look to expand their market footprint. “Model providers—Google, Anthropic, —are not yet the economic winners. They are still absorbing heavy infrastructure costs and actively subsidizing enterprise adoption: discounted token costs and, in some cases, direct services co-investment,” said Motilal Oswal Financial Services analysts Abhishek Pathak and Keval Bhagat, in a 4 May note.
Mounting concerns
However, an analyst said OpenAI’s approach is more likely to eat into IT outsourcers’ work. “This differs sharply from Anthropic’s approach. Anthropic’s $1.5B JV is smaller, financially structured, and relies on existing system integrators (SIs) as deployment partners. OpenAI is building its own services arm and bypassing traditional SIs, despite announcing a frontier alliance with multiple SIs (CapGemini, Infosys),” said Sushovon Nayak, lead IT analyst at Anand Rathi Institutional Equities.
A second analyst said this validates the business model of IT services firms, which have long relied on software modernization as a key growth driver in the face of new tech advancements.
“This is a big validation of companies’ business models now that frontier AI companies are also launching deployment units. This means implementing AI across a legacy enterprise landscape is challenging and requires contextual knowledge,” said Karan Uppal, lead IT analyst at PhillipCapital.
“Open AI and Anthropic can directly approach clients, and they are also partnering with system integrators such as Accenture and Infosys. Fear is that large banks, manufacturing or retail clients might now outsource more work to these AI companies rather than IT services firms,” he added.
AI onslaught
This is the third instance this year that the country’s top IT players have lost investor confidence over major rollouts by AI-native firms such as OpenAI and Anthropic.
Indian IT players’ rivalry with Ai-native players started this year when their shares fell more than 3% after Anthropic announced new plug-ins to existing that can autonomously track, review and summarize legal documents, or link directly to data dashboards and spreadsheets to analyse trends and generate financial models.
Two weeks later, Infosys and HCLTech chairpersons rubbished fears of AI eating into their business, adding that companies would not be able to keep up with the pace of AI advancements and that IT outsourcers would be needed to ‘bridge the technological gap’.
“The main thing is that the technology is far ahead of its deployment. Because of this race and spending billions on some AGI (artificial general intelligence) and all that, the technology is moving faster than the ability of enterprises to deploy it,” said Nandan Nilekani, chairman of Infosys, during its first investor day on 17 February.
Two months later, the CEOs of four of the country’s five largest IT services companies admitted to AI-led revenue declines, sending their shares into a free fall. Shares of each of these firms fell between 2.5% and 11% a day after their 2025-26 earnings announcement.