Tech-heavy Nasdaq ended lower on Thursday, as the world’s most valuable company Nvidia, saw its share price decline by 5% a day after rising sharply, following its better-than-expected January quarter results and high revenue forecast for the ongoing quarter.
Google-parent Alphabet shares declined nearly 2%, while Amazon shares were down more than 1%. AMD shares slipped 3%, while Salesforce shares jumped more than 4% on strong earnings. The Nasdaq Composite index closed 1% lower.
Additionally, the US labour department’s data showed that the number of Americans filing new applications for jobless benefits increased marginally last week and the unemployment rate appeared to hold steady this month. Initial claims for state unemployment benefits rose 4,000 to 212,000 for the week ended February 21, slightly higher than the Reuters forecast of 215,000.
The Indian IT stocks have seen a significant decline recently, falling around 20% in February so far, despite bouts of partial recovery in between, amid worries around the possibility of an artificial intelligence-led disruption in the sector. The rout began earlier this month after AI startup Anthropic launched plug-ins for its Claude Cowork agent, which could automate tasks across legal, sales, marketing and data analysis.
What lies ahead?
According to experts, the IT sector itself has underperformed the benchmark indices in the last one year. However, the valuations still remain stretched which can lead to some rating changes, although the AI worries may not immediately impact earnings, said Balaji Rao Mudili, Research Analyst at Bonanza.Sushovon Nayak, Research Analyst at Anand Rathi Institutional Equities, believes the AI technology cycle is still at the beginning of the monetisation phase, with Indian IT likely to emerge as a key beneficiary of the current AI spending. “We expect high volumes of legacy modernisation, data engineering, and transformation-led partnership work to come the way of Indian IT players, given their role as implementation partners and system integrators for enterprise-scale AI adoption,” the analyst said.
At current levels, given attractive multiples and an improving demand environment, investors should consider gradually accumulating select IT names and increasing allocation on every 5-7% decline in stock prices, Nayak further said, adding that the recent weakness is close to the bottom.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)