Explained - What is causing the steep sell-off in IT stocks on Tuesday

Shares of Indian IT companies, Infosys Ltd., TCS Ltd., HCLTech Ltd., and other large and midcap peers are trading with losses of up to 4% on Tuesday, May 12, after the latest announcement made by OpenAI.

Coforge, Persistent Systems, Mphasis, Infosys and LTIMindtree are trading with losses of 3% to 4%, while Tech Mahindra, TCS, HCLTech, and Wipro are trading with losses between 2% to 3%.

The OpenAI Announcement

On Monday, OpenAI, the company behind ChatGPT, announced that it is launching the OpenAI Deployment Company, a new company designed to help organisations build and deploy AI systems for every day work.

The OpenAI deployment company is a committed partnership between OpenAI and 19 leading global investment firms, consultancies, and system integrators, including TPG, Advent, Bain Capital, Brookfield, along with Goldman Sachs, SoftBank, Warburg Pincus and WCAS as founding partners.

What Are Analysts Saying

According to analysts, OpenAI's new launch embeds forward deployed engineers directly inside client organisations to identify AI opportunities, redesign workflows and deploy production systems at scale.

"Incidentally, this is a word-for-word description of what companies like Infosys, Cognizant and Accenture charge to do," according to the analysts

Stocks At Multi-Year Lows

Shares of Infosys are down 3.6% on Tuesday at ₹1,135.2. The stock is at the lowest level since December 2020.

Shares of TCS are also down 3.5% on Tuesday at ₹2,310, which is the lowest level since August 2020.

Shares of HCLTech are trading 2.3% lower at ₹1,168, the lowest level seen by the stock since September 2023.