Persistent Systems CEO says AI not a bubble, chipmakers in a 'supercycle'; outlines long-term growth path

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Sandeep Kalra, Chief Executive Officer and Executive Director at Persistent Systems, believes the current wave of Artificial Intelligence is not a speculative bubble; rather, the chipmakers are in 'more of a supercycle'. Speaking with CNBC TV18 on the occasion of its 26th anniversary, Kalra differentiated between the underlying technology's long-term impact and market valuations, providing a detailed outlook on how AI will reshape various sectors and drive growth for IT services firms.

He argued that while valuations are a separate discussion, the technology itself is transformative. Kalra outlined a multi-tiered view of the AI ecosystem's beneficiaries. In the short to medium term, he identified chip manufacturers like Nvidia, AMD, and Google, along with ecosystem supporters like Broadcom, as the 'biggest gainers.' He noted their strong order books, which are filled for the next one to two years, are a testament to the immense investment in data centre infrastructure.

For hyperscalers such as Microsoft, Google, and AWS, Kalra pointed out that while they are investing hundreds of billions in capital expenditure, they are also actively monetising this through AI cloud services, developer tools, and co-pilots, creating real revenue and profitability. For technology services companies like Persistent Systems, Kalra sees them as 'winners in the longer run.'

He argued that possessing the technology is only one part of the equation. The real value for enterprises lies in integrating AI into their specific contexts, building new business use cases, and developing new business models, all of which require significant system integration activity. Currently, he said many enterprises are in the initial stages, focusing on getting their data ready for AI consumption, a space where Persistent is already seeing larger programs.

Looking ahead, Kalra projected a significant revenue shift for the IT services industry. While AI-related projects may currently account for single-digit revenue, he forecasts that in three to five years, AI-native work could constitute '30 to 40% or more' of revenues for such companies. He clarified that this is a multi-year journey, not a short-term projection for the next few quarters. He also touched upon 'agentic AI' as a more advanced stage that is still in its infancy and will require robust, enterprise-wide data integration.

When asked about the impact of the depreciating Indian rupee, Kalra acknowledged that there would be a short-term currency impact. However, he downplayed its overall significance, calling it a 'smaller enabler' for the industry. He emphasised that the Indian IT industry's success is built on more than just currency fluctuations. Kalra pivoted back to his central theme, stating that the most critical factor for the next three to five years is for companies to build strong capabilities in AI, which he believes will provide a 'significant amount of tailwind' for the industry. He declined to offer specific forward-looking guidance on margins, citing the company's silent period during the quarter.