Is AI outpacing IT stocks? Netweb, Newgen jump up to 25% in a week while Nifty IT slips 1.43%

Shares of select artificial intelligence (AI)-linked companies have risen sharply in recent days, even as the broader IT index remained under pressure.

Netweb Technologies India Ltd rose 14.25 per cent in the past five days to Rs 3,589.30. E2E Networks Ltd gained 18.09 per cent to Rs 2,967.70.

Newgen Software Technologies Ltd advanced 25.39 per cent to Rs 606.50. In contrast, the Nifty IT index declined 1.43 per cent over one week.

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The divergence comes amid heightened debate over the impact of AI on business models and valuations in the IT sector.

AI will change business models

Pacific Paradigm & Paradigm ARQ founding partner Punita Kumar Sinha said AI is a transformational technology that will change business models, job markets and productivity across sectors. She said most benefits so far have accrued to US companies as they started investing earlier. However, she added that India has now realised the importance of AI, and awareness is rising among students and companies.

She noted that AI-related stocks globally, particularly in the US, have seen sharp volatility. “There is a debate on who will be the winners and who will be the losers. Even globally, leading technology stocks have seen sharp corrections,” she said.

On Indian IT companies, she said, there is an ongoing debate on whether their business models will need structural changes. She said valuations in parts of the Indian IT sector have corrected and are becoming more reasonable. She advised investors to research companies that are adapting and bringing changes in their business models.

White Oak Capital Management founder, Prashant Khemka, said the current phase is one of the most disruptive periods for the IT industry in the past 25–30 years. “This is a highly disruptive change. Some business segments may collapse, and new opportunities will evolve. The net impact will be known over time,” he said.

He said companies that are nimble and execute well are likely to outperform. He added that his portfolio exposure to large-cap IT companies has reduced over the past six months, while focus remains on better executing players within the sector.

Referring to the deal between Infosys and Anthropic, he said such developments are positive as they reflect new business opportunities emerging in the AI space. “This is not a situation like newspapers versus the internet, where profits collapsed structurally. There will be losses in some segments, but new segments will also grow,” he said.

IT services will adapt

Devina Mehra, Founder and CMD of First Global, said AI may disrupt certain roles in the short term but is unlikely to destroy IT companies.

Drawing a parallel with the computerisation of banks in the 1980s, she said fears of large-scale job losses had surfaced then as well. “When banks were computerised, there were strikes as employees feared job losses. Many tasks were automated, but overall employment in banking increased over time,” she said.

She said technological change historically leads to temporary disruption but also creates new opportunities. “Every major technological advancement creates anxiety initially. But eventually, new jobs and new business models emerge,” she added.

On IT services companies, she said she was not overly concerned about their long-term prospects. “IT services firms will adapt their business models. They have done so earlier during phases like Y2K, cloud adoption and digital transformation,” she said.

However, she said IT services and IT-enabled services have been key drivers of employment over the past 25 years. Any slowdown in hiring could have a multiplier impact on related sectors such as real estate and services.

On IT stocks, she said sentiment has turned cautious and described market sentiment as a contrarian indicator, adding that extreme pessimism often coincides with better forward return probabilities.

AI infrastructure and data centre developments

Amid the debate, some companies have announced AI and data centre-related developments. Netweb Technologies India Ltd launched ‘Make in India’ AI supercomputing systems powered by NVIDIA platforms, including Tyrone Camarero Spark and GB200 systems.

The company said the systems combine NVIDIA Blackwell GPUs, NVIDIA Grace CPUs, networking and AI software stack to accelerate AI development and inference workloads in India. Its Managing Director and CEO, Sanjay Lodha, said the launch creates a new customer segment in collaboration with NVIDIA and supports the AI developer market.

Aurionpro Solutions said it won a significant order from a global data centre developer for the design and execution of a brownfield facility in Mumbai. The project will be implemented over the next three quarters and includes engineering, construction, testing and commissioning. The company cited a CBRE report stating that Mumbai accounts for 53 per cent of India’s total operational data centre capacity.

The recent gains in select AI-linked stocks come even as the Nifty IT index has declined 1.43 per cent over one week. Nifty IT has fallen 8,289 points from its 52-week high of 40,905.40 to 32,616.40. This translates into a decline of about 20.27 per cent from the 52-week high.

Similarly, the BSE Information Technology index has dropped 14,130.72 points from its all-time high of 45,791.73 to 31,661.01, which is a fall of about 30.86 per cent.

Experts said the sector is undergoing disruption, with debate around business model changes, margins and valuations, while also highlighting new opportunities emerging in AI-related segments.