Shares of information technology companies came under heavy selling pressure on Wednesday, with frontline names such as Infosys, TCS, HCL Tech, Wipro and Tech Mahindra falling up to 7%. The weakness followed a more than 6% gain in the Nifty IT index over the previous three sessions.TCS, India's largest IT services company, plunged 7% to Rs 2,280 on the BSE, while Infosys fell 4% to Rs 1,222 per share. Wipro declined 2% to Rs 206, HCL Tech dropped 3.5% to Rs 1,201, and Tech Mahindra slipped 5% to Rs 1,496 apiece.The recent rebound in IT stocks follows a steep correction earlier this year, triggered by concerns that advances in artificial intelligence could fundamentally disrupt the software services industry. Sentiment took a hit after AI startup Anthropic launched plug-ins for its Claude Cowork agent, capable of automating tasks across legal services, sales, marketing and data analysis.Yet, despite the fears, several brokerages remain constructive on the sector's long-term prospects.What's ahead for IT stocks?Hong Kong-based CLSA said that while AI is forcing a shift in pricing models from seat-based to consumption-based structures, earnings estimates and management guidance across the sector remain resilient. The brokerage believes IT companies with strong partnerships with SaaS providers are likely to continue benefiting from demand for product engineering and implementation services.CLSA also drew a distinction between different categories of software. It argued that Systems of Record (SoR) are less vulnerable to AI disruption because they require deterministic outputs. In contrast, AI models are probabilistic and may generate different responses to the same query. Instead of replacing SoR platforms, AI is more likely to enhance them by acting as an additional interface layer. Systems of Engagement (SoE) and Systems of Work (SoW), however, face greater disruption risks since AI can more directly replicate their outputs.Arbind Maheswari of BofA Securities told ET Now that global investor flows are increasingly concentrated around one dominant theme: technology and artificial intelligence. "There are people who believe that Indian IT services' whole business model is put to question by the AI trade. The other side is that IT services companies will evolve and adapt, and they have enough cash flow, they have the resilience, and they have shown this in the past where there were threats that seemed existential for the IT services space.”“This time obviously it is much bigger, and it could last longer, but I am sure there is enough that these companies have in them both in terms of depth of management and business models that they can evolve to adapt to the new AI world," he said.Domestic brokerage Nuvama Institutional Equities has also pushed back against the bearish narrative, arguing that the sector is setting up for a powerful comeback rather than a structural decline following the AI-led selloff."We see no existential threat from Gen-AI," the brokerage said, adding that enterprises will continue to require system integrators to customise plug-and-play AI and software solutions for their highly complex legacy technology environments. Nuvama also noted that businesses will continue to depend on service providers to take responsibility when mission-critical systems fail.Echoing the constructive view, Kunal Bajaj, Research Analyst at Choice Institutional Equities, said improving sentiment around global software companies and growing evidence that enterprise AI adoption is expanding technology spending opportunities are supporting Indian IT stocks."Indian IT stocks continue to extend gains, supported by improving global software sentiment and growing evidence that enterprise AI adoption is expanding technology spending opportunities rather than disrupting incumbent service providers," Bajaj said.He added that a weakening rupee, strong order books and improving expectations for discretionary technology spending are further aiding the sector's recovery.From a technical standpoint, Jatin Gedia of Teji Mandi said the Nifty IT index has broken out of an Inverted Head and Shoulders pattern, a widely followed bullish reversal formation. The move was confirmed by follow-through buying above the neckline during Tuesday's session, signalling strengthening momentum.According to Gedia, the breakout places the index in a position of technical strength and points to a target range of 32,300-32,500. From the current level of around 31,050, this suggests a potential upside of roughly 3.5-4% in the near term.The optimism, however, stands in contrast to the behaviour of foreign institutional investors. Unconvinced that India's software services giants can fully escape the disruptive impact of AI, FIIs have continued to pare exposure to the sector. In 2025 alone, foreign investors sold IT stocks worth Rs 74,698 crore.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)