IT stocks plunged up to 5 per cent in Wednesday's trade, with Infosys Ltd, Tata Consultancy Services Ltd (TCS), Coforge Ltd, Tech Mahindra Ltd (TechM) and Mphasis leading the selloff as a growing artificial intelligence (AI) capex pipeline dampened investor sentiment and dashed hopes of a 'reverse AI' trade.

"The escalating capital intensity, funding requirements & utilisation risks remain concentrated in the infrastructure layer, while Indian IT offers relatively asset-light exposure to the subsequent enterprise deployment cycle, supported by net-cash balance sheets, low capex intensity & strong cash conversion," Anand Rathi said.

Citing the Anthropic IPO filing, Anand Rathi today noted that Anthropic has $321 billion of leases yet to commence, alongside $269 billion across Google ($114.5 billion), Amazon ($110 billion) & Microsoft ($44.9 billion) in minimum compute spend commitments, highlighting the escalating forward obligations despite improving unit economics.

To recall, Meta, with its negative Q3 free cash flow, and cash barely covering its debt, is reportedly raising over $95 billion. SpaceX closed $40 billion of GPU/DC debt on top of an $86 billion IPO. Taken together, near-term cumulative funding requirements of $235 billion, assuming $100 billion Anthropic IPO, reinforce need for compute being fulfilled by a capital hungry build-out, Anand Rathi said.

Microsoft’s workforce rationalisation signals AI-led pricing deflation, while rising compute capex could further constrain discretionary IT spending, it warned. Infosys fell 4.99 per cent to hit a low of Rs 1,103.95 apiece on BSE amid ratings downgrades by at least six brokerages including Axis Capital, IIFL, Anand Rathi and Arihant Capital, this week. This followed as its FY27 revenue guidance cut was slightly higher than anticipated.

Mphasis declined 4.75 per cent to Rs 2,494.10. TCS fell 3.28 per cent to Rs 2,415. TechM dropped 3.21 per cent to Rs 1,753.30. Coforge slipped 2.68 per cent to Rs 1,943.40. HCL Tech, Wipro, Persistent Systems saw losses up to 2.6 per cent.

The emerging risk, Anand Rathi said, is the interconnected financing ecosystem, where infrastructure investments are increasingly underwritten by future compute demand.