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IT: Most of the negatives priced in; AI led transformation to provide long term growth leg

ICICIdirect Research 29 Aug 2025 DISCLAIMER

On the global front, Nvidia has reaffirmed robust AI demand, projecting $3–4 trillion in infrastructure spending by the end of this decade, calling it a “new industrial revolution.” Blackwell chips are expected to drive long-term growth, even as geopolitical risks and trade restrictions weigh on near-term sentiment. For India, Nvidia’s upbeat outlook underscores the sustained global momentum in AI investments, which could translate into rising demand for domestic IT firms and AI-led transformation opportunities in the medium to long term. 
The IT sector is also expected to benefit from easing macro headwinds, with anticipated US Fed rate cuts likely to support rate sensitive sectors such as BFSI and Retail in US. Thus, while FY26 may remain muted, improving demand visibility may provide a better growth in FY27, if US has a decent rate cut cycle. 
The Nifty IT index has already corrected ~18% in CY25YTD, reflecting that most of the negatives are priced in. From a medium-to-long term perspective, select pockets of value are now emerging. We continue to remain selectively positive in the IT space.

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