Why are tech stocks falling today: Nifty IT cracks 3% on US yields, H-1B visa fees, AI risks
The tech stocks are under huge selling pressure today. The Nifty IT Index is down 3% with big names like Infosys seeing as much as 4% cut in intra-day trade. The Nifty IT Index has slumped to nearly 1-month lows. Counters like TCS, Tech Mahindra, Wipro and HCLTech have cracked 2-3%. All the 10-constituent of Nifty IT Index are in the red. Coforge has recovered slight ground after the sharp 7% cut in early trade.
There are several factors why the tech stocks are under pressure right now. The big triggers include rising bond yields, geopolitical conflict, and AI deflation concerns.
Concerns about hawkish Fed stance, geopolitical worries
One of the biggest worries is the upcoming Fed meeting next week. The street is worried about possible hawkish stance by the Fed.
Sumit Pokharna, SVP Fundamental Research, Kotak Securities, highlighted that “The IT sector is facing pressure due to a combination of macroeconomic and structural concerns. First, rising uncertainty around the US Federal Reserve’s policy stance remains a key overhang, with any hawkish commentary potentially weighing on IT stocks. Expectations of higher bond yields, coupled with geopolitical tensions and elevated crude oil prices, are raising concerns over inflation and further tightening of financial conditions.”
Sushovon Nayak, Lead IT Analyst, Anand Rathi Institutional Equities added that “the strong US Jobs data and potential increase in US inflation, with the data to be released later this week, have increased the probability of rate hikes, which would have pressure on IT / Tech stocks. Overall, the fragile geopolitical environment amid the Middle East crisis, would further defer decision making among enterprises, putting pressure on revenues.”
US 10-year yield climbing higher stoking inflation worries
What’s further adding to the inflation worries is the yield hardening. The rising bond yield in US is impacting investor sentiment as they are now worried that higher inflation may dent revenue visibility.
Manav Medewala, Research Analyst at Mirae Asset Sharekhan explained that “The US 10-year Treasury yield has climbed above 4.81%, similar to what was seen in 2007. When “safe” government bonds pay more, investors demand more from riskier assets like tech stocks, which pulls valuations down. This also puts governments in a bind.”
He added that “with yields rising and deficits growing, they’re left with two options: print more money (which risks inflation) or keep interest rates higher for longer (which raises borrowing costs). Both paths squeeze discretionary spending and tech budgets are usually the first to get cut when companies tighten belts.”
Growing concerns about AI-led disruption
The other big factor that’s impacting sentiment is the AI-led revenue deflation worries.
Sushovon Nayak pointed out that “with the release of GPT-6 Astra by OpenAI, which is supposedly close to AGI, over the weekend, IT stocks have come under pressure, similar to the Feb-26 decline post the release of Claude Coworks.”
According to Pokharna, “The rapid emergence of new AI models is intensifying concerns around potential disruption to traditional IT services and the visibility of future revenue growth. This is particularly relevant as productivity gains from AI could increase pricing and revenue pressure.”
Increasing visa-related costs
The other other important factor that is weighing on investor sentiment is the increasing visa-related costs. Recent data released by the US Department of Homeland Security indicates a significant decline in H-1B visa lottery participation by companies, following the introduction of a $100,000 fee for certain H-1B hires from outside the US.
Kotak’s Sumit Pokharna highlighted that “The sharp increase in visa costs is likely to materially affect the economics of offshore and onsite staffing models, particularly for large IT services companies that rely on H-1B visas to deploy skilled professionals in the US.”
“Consequently, major technology companies, including Infosys, TCS and IBM, have reportedly reduced or reassessed their overseas hiring and visa sponsorship plans. The development has raised concerns over potential pressure on US-based demand, employee mobility, margins, and revenue growth for Indian IT service providers.”
Investors need to look at long-term prospects
Apart from that, analysts also pointed out that sustained FII selling in the domestic market is also adding to the weakness. “FIIs have reportedly sold around U1.5 billion of Indian equities over the past five days. With limited visibility of near-term green shoots and continued foreign outflows, the IT sector remains under pressure,” Pokharna added.
However, on a positive note, he believes that “valuations of the companies in the IT sector have improved a lot. We have to be stock-specific and invest from a long-term perspective.”
Experts pointed out that while near-term sentiment remains weak, the extent of the correction will ultimately depend on the duration of geopolitical risks, US technology spending, visa-policy developments, and the pace of AI-led disruption.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.