The global technology sector witnessed a sharp jolt this week after an unexpected announcement from a US-based AI start-up sent shockwaves across stock markets. Indian IT stocks plunged sharply, mirroring a sell-off on Wall Street, as fears grew that Artificial Intelligence may soon disrupt — or even replace — traditional software and IT services businesses.
At the centre of the storm is Anthropic, a San Francisco–based AI company, which recently launched a new workplace automation suite called Claude Cowork. What initially appeared to be just another AI product launch quickly turned into a market-moving event, triggering one of the worst single-day falls in the Nifty IT index since the Covid crash.
Nifty IT Sees Its Biggest Fall Since Covid
On Wednesday, the Nifty IT index crashed nearly 6%, marking its steepest single-day decline since March 23, 2020, when markets collapsed during the early days of the pandemic. Every stock in the index ended in the red.
India’s largest IT firms were among the hardest hit:
- TCS, Infosys, Wipro, and HCL Technologies fell between 4% and 7%
- Mid-tier IT stocks also saw heavy selling pressure
- Infosys ADRs plunged over 5.5% on the Nasdaq
The fall reflected growing anxiety among investors about the future relevance of IT services companies in an AI-driven world.
What Is Claude Cowork and Why Did It Spook Markets?
The trigger came from Anthropic’s launch of Claude Cowork, a new AI workplace automation platform powered by its Claude AI agent. Along with the platform, Anthropic rolled out 11 specialised plug-ins designed to automate tasks across multiple business functions.
These include:
- Legal work such as contract review, NDA analysis, and compliance monitoring
- Sales and marketing operations
- Financial reporting and analysis
- Data summarisation and insights generation
What makes Claude Cowork different — and potentially disruptive — is that the AI agent can perform tasks directly, without needing traditional enterprise software interfaces like Salesforce, ServiceNow, or other SaaS platforms.
This represents a fundamental shift in how enterprise software may work in the future.
The “SaaSpocalypse” Fear Explained
Investment bank Jefferies described the situation as a potential “SaaSpocalypse”, referring to the risk that Software-as-a-Service (SaaS) companies could face declining relevance.
The concern among investors is straightforward but unsettling:
If a single AI assistant can review contracts, flag risks, generate reports, analyse data, and summarise insights — why would businesses continue paying for multiple high-cost software subscriptions?
This fear led to a sharp re-rating of software and technology stocks globally.
Wall Street Joins the Sell-Off
The impact was not limited to India. US markets also reacted sharply:
- S&P 500 fell 0.84%
- Nasdaq Composite declined 1.43%
- Microsoft and Meta Platforms dropped over 2%
- Nvidia slipped nearly 3%
- Salesforce and ServiceNow plunged close to 7% each
Since Indian IT stocks historically track movements in the Nasdaq, especially during sharp tech-led sell-offs, the impact quickly spread to domestic markets.
Why Indian IT Companies Are Especially Vulnerable
Indian IT firms have built their global success on providing services such as:
- Data processing and analytics
- Contract and compliance management
- Customer support operations
- Enterprise software implementation and maintenance
Ironically, these are exactly the areas where AI tools like Claude Cowork are advancing the fastest.
For decades, India’s IT industry benefited from cost efficiency and skilled manpower. However, AI reduces the need for large human teams, raising fears that traditional outsourcing models could weaken.
Is the Market Reaction Overdone?
Some analysts believe the sharp sell-off may be a knee-jerk reaction, amplified by broader weakness in global tech stocks.
“It is difficult to gauge the exact long-term impact of Anthropic’s AI tools at this stage. This looks like a reaction driven by Nasdaq movements rather than company-specific fundamentals,”
said Sunny Agrawal, Head of Research at SBICAPS Securities.
However, most agree that the underlying concern is real, even if the immediate market response was exaggerated.
Economic Survey Had Already Flagged This Risk
Interestingly, India’s Economic Survey 2025–26 had already warned about the growing risks posed by AI to the country’s IT sector.
The survey highlighted that:
- Control over AI data and computing power is highly concentrated globally
- This creates concerns around technological dependence and supply chain resilience
- India’s traditional IT advantage could weaken if firms fail to adapt
The report cautioned that delayed adaptation “risks hollowing out India’s core value proposition” and called for a comprehensive evolution of the sector to fully leverage AI development and deployment.
AI: Threat or Opportunity for Indian IT?
While headlines focus on fear and disruption, AI is not necessarily the end of Indian IT companies. Instead, it marks a turning point.
AI is likely to compress lower-value services, but it also opens new opportunities in areas such as:
- Custom AI integration for enterprises
- Industry-specific AI solutions
- AI governance, security, and compliance
- Cloud and AI infrastructure management
IT firms that move up the value chain and embed AI into their offerings may emerge stronger than before.
Final Thoughts
Anthropic’s Claude Cowork launch has forced markets to confront a difficult reality:
AI is no longer just a tool to boost productivity — it is becoming a replacement layer.
The sharp fall in tech stocks reflects uncertainty and fear, but not inevitability. The future of the software and IT services industry will depend on how quickly companies adapt, innovate, and reposition themselves in an AI-first world.
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