- AI fears have caused sharp declines in tech stocks, some dropping 40-50% from peaks
- IT sector stocks hit hardest due to worries over AI automating software and reducing demand
- Markets often overprice worst-case AI impacts, dragging down firms with strong fundamentals
Stock Market News: Artificial Intelligence (AI) has changed the way investors look at technology companies. Over the past few months, fear of AI disruption has wiped out billions from the market value of several tech stocks. Some companies have even seen their share prices tumble 40-50 per cent from their peak.
For many investors, that looks like a warning sign. But for others, it could be an opportunity.
According to ArunaGiri, Founder & CEO, TrustLine Holdings, markets may have overreacted in several cases. She believes AI fears have pushed down the valuations of many companies far more than their actual business performance justifies.
"The market often prices in the worst-case scenario during major technological shifts. AI is no different. Investors have broadly punished entire sectors, even when several companies continue to deliver healthy business performance," ArunaGiri says.
IT Stocks Took The Biggest Hit
The IT sector has been at the centre of AI concerns.
Investors worry that AI will automate software development, reduce demand for traditional IT services and put pressure on pricing. That fear has led to sharp corrections in many frontline IT companies, with several stocks falling between 40 per cent and 50 per cent from their highs.
Yet ArunaGiri says the picture is still unclear.
Leading IT companies continue to give cautious business outlooks. Management teams have also admitted that it will take time to understand how AI will reshape the industry. Until there is better visibility on growth, the sector may continue to remain under pressure despite cheaper valuations.
The Bigger Opportunity May Lie Elsewhere
According to ArunaGiri, investors looking only at IT companies may be missing the real story.
She says markets often treat every technology-related company the same during periods of disruption. Businesses with completely different revenue models also end up getting sold simply because they fall under the "tech" label.
"This creates AI-led mispricing. Companies with strong fundamentals get dragged down along with businesses that genuinely face disruption. That is where patient investors should look," she explains.
CarTrade Shows How Quickly Sentiment Can Change
One example highlighted by ArunaGiri is CarTrade. When fears grew that AI-powered search tools would replace online platforms, investors rushed to sell companies whose businesses depended on online search and advertising.
The panic wasn't limited to India. Global companies such as CarGurus, CAR Group, Salesforce, Atlassian and Snowflake also witnessed sharp corrections as investors feared AI would reshape the Software-as-a-Service (SaaS) industry.
CarTrade's shares fell more than 50 per cent from their November 2025 peak as investors worried AI could bypass traditional vehicle discovery platforms.
But the fears did not fully play out. Alphabet's advertising business continued to post healthy growth, suggesting AI had not yet disrupted online search as much as many had feared.
At the same time, CarTrade reported strong quarterly earnings, supported by healthy demand in the automobile market.
The combination changed investor sentiment quickly. Brokerages upgraded the stock, AI fears eased and CarTrade rallied more than 80 per cent from its March lows, almost returning to its previous record highs.
According to ArunaGiri, the episode shows how quickly markets can correct themselves once business fundamentals begin to outweigh fear.
More Companies Could Follow
ArunaGiri believes CarTrade is not an isolated example. Several companies continue to trade at depressed valuations because investors remain worried about AI disruption, even though there is little evidence that their core businesses have weakened.
She points to companies such as MPS, where strong quarterly performance quickly reversed negative sentiment. In other cases, temporary business challenges have delayed the recovery, even though AI may not be the main problem.
These are the kinds of businesses long-term investors should monitor closely, she says.
One interesting opportunity, according to ArunaGiri, lies in the learning and training sector. She points to a leading Learning Management company that many investors still treat like an IT services firm. As a result, its valuation has also suffered during the broader technology sell-off.
But the business itself tells a different story. Less than one-fifth of its revenue now comes from IT clients. At the same time, AI adoption is creating a growing need for employees to learn new skills, making training and upskilling businesses more relevant than ever.
"The market is still valuing some companies based on old assumptions instead of current business realities. These gaps between perception and fundamentals often create attractive investment opportunities," ArunaGiri says.
Fear Doesn't Last Forever
History shows that financial markets often overreact during periods of major technological change.
That happened during the internet boom. It happened during the global financial crisis. And according to ArunaGiri, AI may be following the same pattern.
While some companies could indeed face disruption, many others may simply be victims of excessive pessimism.
