3 hrs ago
BoB Capital Cuts IT Stock Targets Amid AI Disruption Risks
BoB Capital Markets thinks IT companies may have a difficult few years.
Higher prices, interest rates and tariff worries are making clients cautious.
Some companies are delaying optional technology projects.
Artificial intelligence may also reduce the amount clients pay for some IT services.
New competitors, including AI companies and large cloud providers, may take part of the work.
The brokerage does not expect the industry to quickly return to strong growth.
It rates Firstsource Solutions as a Buy.
It rates several other companies as Sell or Hold, with different target prices.
BoB Capital Markets expects weak IT-services growth to persist through FY29 because of macroeconomic pressures and AI-related disruption.
The brokerage said higher commodity prices, developed-market bond yields and tariff concerns are delaying discretionary projects and ramp-ups.
It expects AI-related deflation to continue until at least FY29, with older contracts facing greater pricing pressure during renewals.
BoB Capital Markets holds six Sell ratings, six Hold ratings and one Buy rating across the covered IT companies.
Firstsource Solutions is the only Buy-rated stock, with a target price of Rs 343; the other named companies have Sell or Hold ratings.
- Who
- BoB Capital Markets and the listed IT companies, including Firstsource Solutions, TCS, Infosys, HCL Tech, Wipro, LTM, Birlasoft and Coforge.
- What
- The brokerage issued or reiterated target prices and ratings for major IT stocks while warning of prolonged weak growth and AI disruption.
- Where
- The analysis concerns the IT-services sector and its global markets, particularly client spending influenced by developed-market conditions.
- When
- The outlook covers 2025, the first half of 2026, FY28 and FY29; the report's publication date is not stated.
- Why
- BoB Capital Markets cited macroeconomic uncertainty, delayed discretionary projects, AI-driven pricing pressure and competition from AI labs, hyperscalers and new entrants.
BoB Capital Markets' cautious view
More optimistic market view
Future IT-services growth
BoB Capital Markets' cautious view
The brokerage expects industry growth to remain subdued through FY29 and maintains lower-than-consensus valuation multiples because of weak growth and AI disruption risks.
More optimistic market view
Some market participants believe the sector could return to mid- to high-single-digit growth in constant-currency or US-dollar terms from FY28 onward after four years of low-single-digit growth.
AI and enterprise spending
BoB Capital Markets' cautious view
BoB Capital Markets says AI labs, hyperscalers and new entrants may compete for enterprise technology spending, reducing traditional IT-services companies' bargaining power.
More optimistic market view
The broader Business AI opportunity is presented as a potential source of future enterprise technology demand, although the article does not provide a specific opposing company forecast.
Key facts
- Brokerage
- BoB Capital Markets
- Rating mix
- Six Sell ratings, six Hold ratings and one Buy rating
- Only Buy
- Firstsource Solutions, with a target price of Rs 343
- AI deflation outlook
- Expected to persist until at least FY29
- Sector outlook
- Subdued growth expected through FY29
- Infosys reverse DCF
- The current market price implies mid-single-digit free cash flow growth for the next 10 years and a similar terminal growth rate, which the brokerage considers insufficiently conservative
- Target-price range cited
- Rs 178 for Wipro to Rs 4,042 for LTM
Sources
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