Indian IT stocks could be in focus at Wednesday's open after US software companies extended their rally overnight, buoyed by optimism that fears around artificial intelligence disrupting the sector have been overdone.
Accenture climbed 4.63% to $143.30, Cognizant gained 6.12% to $43.90, while IBM advanced 3.98% to $311.44 in Tuesday's US session. Other software names also posted solid gains, with Salesforce rising 3.79% to $171.93 and ServiceNow adding 4.57% to $112.86.
The continued strength comes after brokerage Guggenheim last week upgraded Salesforce, ServiceNow and Check Point Software Technologies from "Neutral" to "Buy", arguing that investor concerns over AI permanently damaging the software industry have become excessively pessimistic.
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"Valuations imply many software companies will decline into perpetuity because of AI," Guggenheim analyst John DiFucci wrote in a research note, as reported by Bloomberg. "We don't believe that to be true."
While acknowledging rising competition from AI-native companies such as OpenAI and Anthropic, DiFucci said the market's worst-case assumptions do not reflect the long-term prospects of established software companies.
The brokerage said the sharp correction in software stocks has created attractive entry opportunities, particularly in companies with strong profitability and durable growth prospects. Guggenheim also said it does not expect AI to become "ServiceNow's death knell."
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The rally comes after months of underperformance by software stocks, as investors questioned whether generative AI and autonomous AI agents could disrupt traditional enterprise software providers.
The upbeat move in US software shares could provide a positive read-through for Indian IT companies, many of which derive a significant share of their revenue from North American enterprise technology spending.
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