IT services may benefit from AI over time despite near-term pressure: Neeraj Seth

Artificial-intelligence (AI) spending concerns are likely to keep pressure on technology stocks, according to Neeraj Seth, Founder & CIO of 3R Investment Management, who says the market is reassessing the returns from massive AI investments.“The investors are questioning the AI capex and the potential return on investment on that capex,” he said, adding that the impact is no longer limited to chipmakers and infrastructure providers.

The stress is increasingly visible in the services side of the technology ecosystem. “You’re seeing a significant pressure on a number of software companies, not just in India but across the globe… and I don’t think we have seen the end of it.” As a result, Seth expects markets to differentiate more sharply between winners and losers within the technology space rather than moving all stocks together.

Despite current pressure on technology stocks, Seth remains constructive on India’s IT services sector, particularly for companies that adapt to the next phase of artificial intelligence adoption. He said the industry is transitioning beyond basic applications. “We are now moving from the basic AI application… to a system redesign, not a point solution.”He believes firms that successfully integrate AI into broader business processes could benefit over time. “I am quite optimistic in the long term in terms of India’s ability to pivot and position itself as one of the service providers with AI,” Seth said, adding that while not every company will thrive, stronger and more adaptable IT services firms could emerge as medium-term winners.

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For the entire interview, watch the accompanying video

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