In the 2020s, AI became integral to many business processes globally. AI-powered tools like ChatGPT (developed by OpenAI) and Google Assistant revolutionized everyday applications, from customer service to creative industries. As much as AI has helped people across the world, it is likely to cause a dent in information technology companies’ revenues in 2025.
Earnings to drive gains for IT stocks
Investec, a brokerage firm, in a research report, said that the IT company’s revenues are likely to see headwinds from AI in another year or two. It further said that the IT stocks are trading at peak premiums compared to Nifty despite lower growth. Thanks to the execution of large cost takeout deak wins in the prior year, which benefited FY25. However, deal wins have slowed down. Plus, Investec thinks that there might be a lower scope for growth in the near term.
For the sector to grow, discretionary spending improvement is even more important than any other factor. Also, it believes that the risk-reward ratio is unfavourable as the sector continues to see the potential for marginal results. Investec has downgraded the sector for 2025.
Taking a different view, Goldman Sachs said that it sees the IT sector’s visibility to improve in 2025 along with a recovery in earnings. The brokerage firm has a ‘Buy’ call on tech-major Infosys and forecasted revenue growth of 7% year-on-year. It gave rationale that the growth of the company will be driven by strength in the US economy including sectors such as BFSI and consumer discretion. “Recent positive commentary from US banks support our constructive stance on the sector,” said Goldman Sachs. Recently global IT-bellwether company Accenture revised its revenue guidance upwards and Goldman Sachs is betting on the sector taking it into account. Plus, “improving IT spend outlook support stance on the sector,” added Goldman Sachs.
IT, which has already recovered from its lows after rate cuts, may do well in 2025 as discretionary spending picks up, provided Trump does not impose any surprise tariffs, said Deepak Ramaraju, Senior Fund Manager, Shriram AMC.
“Faith in India’s Growth Story Continues,” Motilal Oswal in its outlook commentary said. The Indian economy continues to be a ‘star performing’ economy compared to other emerging markets. Moreover, the brokerage firmly believes that the Indian economy will likely continue its growth momentum in 2025 and remain the land of stability against the backdrop of a volatile global economy.
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