With giants such as TCS, Infosys, and Wipro already facing increased contract cancellations through to 2027, the shift in the technology landscape may lead to mass layoffs, with white-collar jobs being the worst hit, the report noted.IT industry stocks crashed further on Tuesday as fears of an AI-led disruption and software-as-a-service (SaaS) turning obsolete intensified across the sector. The sell-off extended for the 5th straight session, with the Nifty IT index down 21% so far in February and on course to log its worst month since April 2003.The fresh sell-off came after US-based Antrophic, which had first triggered fear across the sector, announced that its Claude Code AI tool can sharply reduce the cost and complexity of modernising legacy software systems, an area which is a major revenue generator for Indian IT firms.A report by US-based Citrini Research sounded a warning to the IT services sector, further deepening fears. The entire success model of the Indian IT SaaS sector was based on being cost effective, offering quality developers to American counterparts at a fraction of the cost. However, the shift to AI automation tools means the cost of an AI coding agent is equivalent to “essentially the cost of electricity,” the report said.With giants such as TCS, Infosys, and Wipro already facing increased contract cancellations through to 2027, the shift in the technology landscape may lead to mass layoffs, with white-collar jobs being the worst hit, the report noted. For every new job AI will create, it will render dozens obsolete, it added. The IT sector has been among the largest employment generators in India Inc., and mass layoffs are likely to cause panic in the system.After these developments, the Nifty IT index nosedived over 5% intraday on Tuesday and eventually ended 4.7% lower. The likes of LTIMindtree, Tech Mahindra, and Persistent Systems crashed over 6%. Blue chips such as TCS, Infosys, and Wipro ended 3-4% lower, hitting fresh 52-week lows. The sell-off in the sector weighed on the benchmark stock indices too, with the Nifty 50 index falling over 1% to end at 25,424.65 points.There was a similar reaction in the US, with the technology-heavy Nasdaq Composite index, a barometer for the IT sector, falling over 1% overnight. Shares of IBM plunged 13%, its biggest single-day drop since October 2000. Crowdstrike sank 10%, whereas giants such as Microsoft and Amazon lost over 2%.Warning bellsOther global broking and research firms have also flagged worries on the Indian IT sector over the past month. HSBC said it expects a 14-16% gross deflationary risk to revenues in the overall sector over the next few years due to AI, compared to the earlier expectation of 8-10%.Story continues below this adJefferies recently downgraded its recommendations on the likes of Infosys, TCS, HCL Technologies, and LTI Mindtree, warning that valuations across the sector may fall another 30-65% from current levels in the worst-case scenario. In current circumstances, the sector offers more downside than upside for investors, it added.Similarly, another global firm CLSA also cut their price target for shares of most players in the sector. While the firm said AI-related fears are overdone, the current negative mood surrounding IT will be changed only by actual earnings growth, and not by any positive commentary by the companies in the sector. © The Indian Express Pvt LtdTags:IT sector