The US and other Asian markets, such as China, Hong Kong, and South Korea, have witnessed a sharp rally in technology stocks driven by the artificial intelligence (AI) boom. This has, in turn, driven the markets significantly higher this year, while the Indian stock market has lagged amid a lack of such AI stocks.

Christopher Wood of Jefferies has called Indian IT stocks a “reverse AI trade”.

Analysts, meanwhile, have predicted that signs of an AI bubble, which has weakened the lure for these stocks in the other global markets, will likely facilitate capital flows into emerging markets like India in 2026.

Indian IT push on AI

Despite its shortcomings, Indian IT companies have started making investments in AI, with TCS, in its recent investor day meeting, sharing the ambition to become the world’s largest AI-led tech services company.

TCS has generated an annualised $1.5 billion in AI services revenue, marking a 16.3% quarter-on-quarter growth. In the second quarter of FY26, HCL Technologies reported standalone AI revenue of over $100 million. At the same time, Infosys is currently running over 225 generative AI programs through its Topaz platform.

Other smaller players like Tata Elxsi, Persistent, Coforge, L&T Technologies, meanwhile, are emerging as niche or specialised plays in the field of AI.

Harshal Dasani, Business Head at INVAsset PMS, said that Tata Elxsi stands out in applied AI for automotive software, while L&T Tech and Cyient gain from AI applications in industrial engineering, aerospace, and digital manufacturing.

“Affle India represents a different AI theme—data-driven consumer intelligence and ad-tech—while Bosch is a long-term AI beneficiary via mobility, automation, and industrial AI rather than pure IT services,” he said.

According to the Stanford AI Index 2025, India ranks among the top five in the world on new companies receiving AI investments, as per a BBC report. Tech giants like Amazon and Microsoft have pledged $50 billion-plus combined investment in India, putting AI in the spotlight and creating opportunities for Indian companies.

Dhanshree Jadhav, Analyst – Technology Services, Choice Institutional Equities, said that AI-led investments are now beginning to reflect in qualitative revenue growth, with revenue growth increasingly outpacing headcount growth, indicating rising non-linearity driven by productivity gains from AI platforms and automation.

“This operating leverage is also evident in resilient margins, despite persistent macro uncertainties, particularly from the US. Importantly, GenAI and AI engagements are transitioning from pilot/POC stages to full-scale production deployments, improving deal sizes and revenue visibility for IT vendors,” said Jadhav.

Looking ahead, AI-led technology demand is expected to remain robust, amid the ramping up of data centres and AI hardware investments.

Which AI stocks to be focus on in India?

According to Jadhav, given the early, sustained, and large-scale AI investments by Tier-I players, TCS and Infosys are expected to stay structurally ahead of peers in monetising the AI opportunity.

“TCS, via WisdomNext and Ignio, has established a strong base for enterprise-wide GenAI adoption, intelligent automation, and non-linear growth, while Infosys, through Topaz, is well positioned to industrialise AI deployment using responsible AI frameworks, reusable assets, and agent-led solutions,” she opined.

Meanwhile, in the Tier-II category, she likes Coforge, backed by its focused AI platforms QuasarAI and Forge-X, which enable faster application modernisation, AI-led engineering, and vertical-specific monetisation.

As per Dasani, among the listed names, TCS, Persistent Systems, Tata Elxsi, and Oracle Financial Services Software (OFSS) stand out structurally over a multi-year horizon.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.