India's IT services sector faces AI-driven upheaval

The combined weight of India’s software exporters in the Nifty index fell below 7.6%, a record low, after the Nifty IT index plunged up to 21% in February 2026, erasing about $50 billion in market value. Analysts warned that generative AI tools such as Anthropic’s Claude Cowork could undercut the outsourcing model that firms like TCS, Infosys and HCLTech have relied on for decades. By early June the index recovered about 8% in three sessions, sparking debate over whether AI is a threat or a growth catalyst for the sector.

Amid the industry turmoil, former Infosys chief Vishal Sikka launched Hang Ten Systems, a Bay‑Area startup that automates software development and operations with AI. The company raised a $32 million seed round led by Mayfield, with participation from Aramco Ventures and angel investors, and has already secured customers such as Siemens Gamesa Renewable Energy and Fresenius. Hang Ten’s model aims to scale AI‑driven project delivery beyond the linear headcount growth of traditional IT services.

The AI disruption debate intensified as Infosys shares fell more than 35% this year, while the firm projects a $300‑$400 billion AI‑first services market by 2030. Investors and analysts are watching both the market‑share shifts in Indian IT firms and the emergence of AI‑centric startups like Hang Ten for signals of the sector’s future direction.