IT Stocks Snap Winning Streak As Global AI Trade Shifts Back To Chipmakers

Indian IT stocks came under sharp selling pressure on Friday, with the Nifty IT index falling more than 3% in early trade as investors booked profits after a strong five-session rally and shifted back towards global artificial intelligence (AI)-linked technology stocks.

The sector was the worst performer on Dalal Street, with TCS falling 3.5%, Infosys declining 3.4%, Persistent Systems shedding 3.2%, Mphasis losing 2.5%, Wipro dropping 2.4%, while LTIMindtree and HCLTech fell around 2.1% each. Coforge, which had rallied strongly over the past week, also traded lower.

Profit Booking After A Strong Rally

Friday's decline was largely driven by profit booking after a sharp run-up in the sector. The Nifty IT index had gained around 15% in July, putting it on track for its strongest monthly performance in six years, following a five-session rally.

The rally had been fuelled by investors rotating into Indian IT services companies while reducing exposure to global AI-linked semiconductor and hardware stocks.

After such a steep advance, traders chose to lock in gains as global technology sentiment improved.

AI Trade Shifts Back To Global Chipmakers

The bigger trigger for the reversal was the renewed strength in global AI-related stocks.

Earlier this week, Indian IT companies such as TCS, Infosys, HCLTech, Wipro and Tech Mahindra benefited from concerns over heavy AI infrastructure spending and stretched valuations among global chipmakers. Since Indian IT firms have limited direct exposure to AI chip manufacturing and capital-intensive AI infrastructure, they were viewed as relatively insulated from the global AI selloff.

That positioning changed overnight after Microsoft and Amazon reported strong quarterly earnings and reiterated aggressive investment plans for AI infrastructure, easing fears that hyperscalers would cut AI spending.

Microsoft's upbeat outlook helped lift its shares by more than 15%, triggering a broad rally in global technology stocks and reviving confidence in the long-term AI growth story.

Asian Chip Stocks Surge

The improved sentiment spread across Asia, where investors piled into semiconductor stocks.

The MSCI Asia Pacific Index climbed as much as 4.3%, marking its biggest gain in nearly four months.

South Korea's Kospi surged as much as 17%, driven by heavyweight chipmakers Samsung Electronics and SK Hynix, while Taiwanese stocks also posted strong gains.

The rally followed a sharp rebound in the Philadelphia Semiconductor Index, which recorded its biggest advance in more than a year after major technology companies reaffirmed their commitment to expanding AI infrastructure.

With global investors rotating back into AI-linked chipmakers, Indian IT services stocks witnessed profit booking despite retaining their strong monthly gains.