CLSA downgrades major Indian IT stocks amid AI concerns

The international brokerage CLSA has downgraded several major Indian information technology companies, citing concerns over the impact of artificial intelligence on the industry's growth. The firm anticipates that AI could exert deflationary pressure on traditional managed services and legacy businesses, potentially limiting USD revenue growth to low-to-mid single digits until approximately 2030.

Specifically, CLSA downgraded Tata Consultancy Services (TCS), Infosys, and Tech Mahindra from 'outperform' to 'hold'. The brokerage also issued more cautious ratings for Wipro and Mphasis, downgrading both to 'underperform'. While some target prices were adjusted upward for TCS and Infosys, the overall sentiment suggests that the full benefits of AI integration may take time to materialize and that mid-cap companies might offer better opportunities than the current industry heavyweights.