1 hr ago
Infosys Derating Reflects Reverse AI Trade, Note Says
Some investors are less excited about Indian technology companies because they are worried about artificial intelligence changing the IT-services business.
This is being called a “reverse AI trade.”
However, the biggest Indian IT companies still added 6,200 jobs in the latest earnings season.
A Jefferies note says India’s renewable-energy and electricity expansion may be a stronger long-term growth story.
Solar power, batteries, electricity grids, and energy-management systems are expected to become more important.
China has already built large energy networks and advanced battery storage.
Hitachi Energy India expects electricity demand in India to double by 2035.
Its shares have already risen sharply, so investors are paying a high price for the company.
Indian fund managers are treating IT stocks as a “reverse AI trade,” according to a GREED & fear note cited by Jefferies.
The ten largest quoted Indian IT services companies added 6,200 jobs during the most recent earnings season, Jefferies’ Wood wrote.
The note identified renewable-energy-led electrification as India’s strongest structural private-sector growth story.
Hitachi Energy India projected electricity demand would double to 3,365 TWh by 2035, while total final energy demand rises 50%.
Hitachi Energy India shares have risen 68% this year and trade at 71 times 12-month forward earnings, according to Jefferies.
- Who
- Indian fund managers, major Indian IT-services companies, Jefferies, GREED & fear, and Hitachi Energy India are central to the analysis.
- What
- A GREED & fear note discusses the derating of Indian IT stocks as a reverse AI trade and highlights renewable-energy-led electrification as an alternative structural growth theme.
- Where
- The analysis focuses on India and compares its energy opportunity with China’s grid and battery-storage development.
- When
- The comments refer to the most recent earnings season, a Hitachi Energy India presentation held this week, and projections through 2035.
- Why
- IT stocks are viewed through a negative AI-related lens, while renewable energy, electricity demand, storage, and grid expansion are seen as long-term growth drivers.
IT Caution
Energy Optimism
Indian IT outlook
IT Caution
Fund managers are treating IT stocks as a reverse AI trade, reflecting concern about the sector’s outlook amid the current focus on artificial intelligence.
Energy Optimism
The sector has not shown an outright employment decline: the ten largest quoted IT-services companies added 6,200 jobs in the latest earnings season.
Best structural growth story
IT Caution
The current market focus on AI has contributed to India being viewed through a reverse-AI lens, which has put IT stocks under pressure or out of favor.
Energy Optimism
GREED & fear says renewable-energy-led electrification, including solar, remains India’s strongest structural private-sector growth opportunity.
Hitachi Energy India valuation
IT Caution
At 71 times 12-month forward earnings after a 68% year-to-date rally, the company’s valuation reflects substantial investor enthusiasm.
Energy Optimism
The company is viewed as a “picks and shovels” beneficiary of rising electricity demand, renewables, storage, and smart demand management.
Key facts
- IT-sector hiring
- The ten largest quoted IT-services companies added 6,200 jobs in the most recent earnings season.
- Main market view
- Indian fund managers are treating IT stocks as a “reverse AI trade,” according to the cited note.
- Energy demand projection
- Hitachi Energy India’s CEO projected total final energy demand would rise 50% by 2035.
- Electricity demand projection
- Electricity demand was projected to double to 3,365 TWh by 2035.
- Electricity share
- Electricity’s share of total final energy demand was projected to increase from 19% in 2023 to 25% in 2035.
- Hitachi Energy India valuation
- The company was trading at 71 times 12-month forward earnings after rising 68% year to date.
- Battery technology
- Exide, Amara Raja, and Waaree Energies were reported to have secured Chinese battery technology; Energy in Motion partnered with CATL.
Quotes
GREED & fear
Investment note cited by Jefferies’ Christopher Wood
“Still at a time when India has been out of favour on the reverse AI perception, it is worth reminding non-specialists that India continues to enjoy its own structural growth story which will prove resilient at a time when the current near all-consuming focus on AI diminishes,”
businesstoday.in
“More days in India convinces GREED & fear that the best structural growth story top down remains energy in terms of the private sector build out of electrification via the expansion of renewable energy, primarily in the form of solar,”
businesstoday.in
Christopher Wood
Jefferies analyst and author of the GREED & fear note
“This means there is a clear template for India to follow though it is a grey area to GREED & fear how much India will be able to benefit from China’s battery storage technology.”
businesstoday.in
Sources
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