Antique cuts TCS, HCLTech to 'Hold'; slashes growth estimates on AI risks

Earlier this week, Jefferies downgraded Indian IT companies Infosys, HCLTech and MphasiS to 'hold'; LTIMindtree, TCS and Hexaware to 'underperform'.

Brokerage firm Antique Stock Broking downgraded Tata Consultancy Services Ltd. (TCS) and HCL Technologies Ltd., citing intensifying artificial intelligence (AI)-led disruption, global hyperscaler capex surge, and rising competitive pressures. 

 

The brokerage slashed the ratings of TCS and HCLTech to 'Hold' from 'Buy', and retained 'Hold' ratings on Infosys Ltd., Tech Mahindra Ltd. and Wipro Ltd. The brokerage reduced its valuation multiples across coverage by 5 per cent to 10 per cent and marginally cut growth estimates, citing rising AI-led risks and relative valuation gaps versus global peers such as Cognizant and Accenture.

 

Analysts at Antique said Indian IT stocks have underperformed broader indices amid global hyperscaler spending shifts, demand uncertainty, macroeconomic concerns, and institutional preference for AI-led global technology names.

 

The note highlighted that hyperscalers such as Microsoft, Google, Meta and Amazon are sharply increasing capital expenditure on AI infrastructure, including data centres, graphic processing units (GPUs), and in-house AI platforms. The top four cloud companies are expected to invest up to $630 billion in capital expenditure in 2026, as per company guidance, marking a more than 60 per cent increase over the record $390 billion spent in 2025.

 

This elevated capex intensity is weighing on Indian IT firms, as hyperscalers increasingly internalise infrastructure and automation work that was earlier outsourced, the brokerage said. The shift is leading to lower discretionary IT services spending growth, delays in project ramp-ups, and reduced outsourcing intensity. Pricing and volume headwinds persist as global technology firms rationalise headcount to fund higher investments, according to Antique. 

 

While cloud revenue growth improved sequentially in the December quarter of calendar year 2025, Antique cautioned that sustained high capex remains a concern in the near term. However, it expects that as capex intensity moderates over the medium term, demand could pivot towards higher-value programmes, including AI-native applications, data modernisation, advanced analytics, and large strategic transformation deals.

 

Earlier this week, global brokerage Jefferies downgraded Indian IT companies Infosys, HCLTech and MphasiS to ‘hold’; LTIMindtree, TCS and Hexaware to ‘underperform’, citing AI-related concerns. The global research and broking house has cut its earnings estimates by 1-4 per cent across IT firms and expects 6 per cent earnings CAGR over FY26-28.

 

While the IT firms should remain relevant, Jefferies said, the nature of their client engagements is likely to structurally shift towards advisory and implementation, with application managed services (22-45 per cent of revenues) seeing sharp revenue deflation.

 

Meanwhile, the Nifty IT index is down nearly 20 per cent so far this year, and has fallen 19.7 per cent this month, the worst fall since April 2003. The latest selloff followed a report by Citrini Research, which flagged the growing influence of AI across the global technology services industry. READ MORE

 

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