The stocks of Indian IT companies are bleeding following the launch of Anthropic, a new Artificial Intelligence (AI) model. The prices of stocks of Indian IT companies have fallen by more than 15% in the last one month. This AI model is capable of replacing software coders and programmers. Particularly in the case of the Indian IT sector, Software as a Service (SaaS) is the main business and revenue source. Such AI models are expected to make the Software as a Service (SaaS) business almost dead! For Indian IT companies, this is news which they never imagined but are now facing. This is a kind of Kodak Moment for the Indian IT sector! Nokia also experienced this and could never recover despite its complete dominance!
The said AI model and such other models are expected to completely disrupt and shake the global IT sector, and the ramifications may be even broader than assumed! However, there is also a possibility that the buzz around AI may prove to be hype, like initial opposition to calculators and computers!
As of now, for a person, AI and its impact on businesses and humanity may be a mystery. Numerous questions are floating around with no final answers. However, for the Indian IT sector, the AI models present a deflection point. People across India are wondering to find the answers to these questions: Why are the stocks of Indian IT companies bleeding on the stock exchanges? Is it just because of disruptive innovation? Or something else?
AI is not something new for the IT world. It has been there for more than a decade. Still, no Indian company has an edge in the AI arena. Rather, they haven't even started. Why? In general, Indian private companies, including IT companies, have behaved like parasites when it comes to research and development and innovation. They hardly invest any money in research. Rather, they focus on using existing technologies to milk as much as possible rather than to lead in technology. Whatever investment in innovation or research and development takes place in Corporate India, those are through public sector companies. In a rapidly changing technological sphere, no one can survive without investing in futuristic technology and innovations. It may be surprising for many that the budgetary allocations for research and development often remain underutilised!
Information asymmetry is one of the most important reasons which result in trading on the stock exchanges. Technology and innovation add to this asymmetry. Those who own futuristic technology and innovation survive in the market, and those who have access to more information earn in the market.
So the stocks of Indian IT companies will keep on bleeding on exchanges, and for some companies, the cycle might be complete to force them into oblivion. In today’s high-paced world, no company can survive without an edge on the technological front. So, without investment in R&D and innovation, which Indian companies don't even dream about, there is hardly any future.
Dr Rajeev K Upadhyay
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