The sell-off in stocks linked to the artificial intelligence boom was triggered by semiconductor giant Nvidia announcing a 15% price hike by year-end. It is the latest in a series of developments that threaten the sustainability of AI companies running high on capital investments and low on revenue and profitability.
The rising pressure on US interest rates may also squeeze the viability of the massive investments planned by hyperscalers like Amazon, Meta, Google, and Microsoft, as explained in our weekly newsletter on Saturday.
Any brake applied to the AI craze has typically triggered a relief rally in software stocks, particularly India-based services giants exporting solutions to the US, often referred to as the anti-AI bets. The Nifty IT Index has edged up three out of the last four trading days.
The stocks have been beaten down in recent months as the global AI craze peaked. Most of the marquee stocks are still down significantly for the year.
| Stock | Year-to-date Aug 24 |
| Wipro | -31.08% |
| Infosys | -29.73% |
| TCS | -28.26% |
| LTIMindtree | -25.15% |
| HCLTech | -18.6% |
Hexaware was the biggest gainer among IT stocks on Monday (August 24) after the company revealed that more than half of its revenue is already ‘AI-infused’, leading CLSA, a multinational broking firm, to project a 37% rise in the stock in the next 12 months.
Hexaware’s gains were backed by strong volumes. More than 1.7 million shares exchanged hands in the first hour of trade; that’s nearly 10 times the last 10-day average.
Read more: There may be more bang for the buck outside the Nifty 50
