Moneycontrol Pro Panorama | Bridging the gap between AI narratives and reality

Latest data indicates a rising share of AI infrastructure and data centres in new technology spends

Dear Reader,

IT stocks rebounded in the first half of Tuesday's trading session, after having fallen sharply in previous sessions. The recovery is being led by Infosys, which announced a collaboration with Anthropic, an AI company. IT stocks had dropped in recent weeks on fears that new AI tools will undermine growth rates of IT services companies. The fears are not without substance.

Latest industry data indicate a rising share of AI infrastructure and data centres in new technology spends, as discussed in our Chart of the Day. The growth of IT companies slowed as AI investments took off.

Still, it is not a zero-sum game as feared by some investors. The IT services pie continues to be large and is expected to grow in future.

As new AI innovations prove their efficacy, there is also a growing realisation of the need for data and application modernisation among business enterprises. This is a large business opportunity and IT companies with contextual knowledge are better placed to enable this.

“There's a big gap between an AI model that works in a demo and one that works in a regulated industry -- and if you want to close that gap, you need domain expertise,” Dario Amodei, Chief Executive Officer (CEO) and co-founder, Anthropic, said in a statement with Infosys.

Application modernisation, migration of legacy data systems and building of AI foundation layers are among the opportunities seen for IT services companies. IT firms have to custom prepare tech stacks of business enterprises to adapt and benefit from new technology.

“I can tell you any tool, any technology will magically not generate value on the other side. You need a bridge. And that bridge is what companies like Cognizant do,” Ravi Kumar Singisetti, CEO of IT services company Cognizant, said in an earnings call earlier this month, referring to recent developments in AI.

Indeed, business is not falling off the cliff for IT companies. Contrary to the fears, most large IT companies have reported a healthy growth in deal flows in the nine months to December 2025. Deal flows in the trailing 12 months to December also increased at a decent pace for large IT companies, barring TCS. The steady deal flow is expected to aid IT services companies in FY27.

Of course, technological innovations are changing the way IT companies work, as Nandan Nilekani, Chairman of Infosys, explained at an event.

Rapid deployment of AI tools is expected to have a deflationary impact on revenues of IT companies. This can constrain growth rates in the near term.

But as business enterprises realise the benefits of AI, the total addressable market for IT services companies is expected to expand. Companies who position themselves well for this change will benefit in the long run. That should be the focus area for investors.

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