Nvidia stock slide, AI valuation reset could benefit Indian IT services firms, says senior govt official

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A reassessment of AI company valuations after a 30 percent plunge in Nvidia’s share price could benefit Indian IT services firms and broader Indian equities, as investors question the returns from massive AI investments, a senior government official said.

Investors are beginning to realise that the AI opportunity may not be as large or as immediately profitable as initially anticipated, prompting some moderation in capital flows into the sector, the official said, requesting anonymity.

Nvidia’s market capitalisation has fallen to around $4.01 trillion as of November 12 from approximately $5.78 trillion on October 6.

The official said investors had been pulling money out of other sectors and concentrating it in AI-focused businesses, but this trend is now beginning to reverse. This could benefit Indian IT companies, including traditional technology services firms, which had faced concerns over AI-led disruption. Some of the capital moving out of AI-linked investments could also find its way into Indian equities through foreign institutional investor (FII) inflows, the official said.

“The development that could potentially have led to a financial meltdown has, so far, not resulted in one. There has been a huge amount of investment flowing into artificial intelligence, with enormous amounts of capital being channelled into the sector. But the trend is now seeing a reversal,” the official said.

“It is good that some moderation is now happening, particularly with Nvidia. Investors are beginning to realise that the AI dream may not be as big as they had initially imagined. I am happy that there is some moderation because it will definitely help India,” the official said.

Indian IT firms could gain

The official said the moderation in AI-focused investments could also ease concerns that the emergence of AI would undermine traditional technology services businesses, including information technology services, business process outsourcing and knowledge process outsourcing.

“There were apprehensions that AI would damage the entire technology sector, including IT services, BPOs and KPOs. But that does not mean AI has come and will damage the entire IT sector. Companies such as Infosys and Tata Consultancy Services will continue to have business opportunities. We have seen a recovery in IT stocks over the past month,” the official said.

The Nifty IT index gained 18 percent in October, its strongest monthly performance in more than six years. It was up 13.5 percent over the month through November 12, according to Moneycontrol market data.

The official said the movement of capital away from an overly concentrated AI investment theme could create opportunities for Indian companies.

“Earlier, investors were pulling money out of different sectors and putting it into AI. Now, that trend is beginning to reverse. Trillions of dollars were being channelled into AI, but a reversal has now begun. Capital is beginning to move into other sectors rather than remaining concentrated only in AI. This is helping Indian companies,” the official said.

Questions over high AI valuations

The government official, however, said the reassessment is not merely about developments involving an individual or a management change at Nvidia, but reflected wider questions about the economics of AI investments.

“This is not about any individual or management change. It is about a broader reassessment of the sector. There are concerns about the feasibility and profitability of AI investments and the returns they can generate on the capital being deployed. What investors were being shown as a dream is not translating into delivery so far. The profit potential and business models of these companies are not particularly exciting for investors at this stage,” the official said.

Foreign money return to Indian equities

The potential shift in global investment allocation could also support foreign flows into Indian equities, the official said.

The official said some of the capital moving out of AI-focused investments could find its way into Indian markets through foreign institutional investor inflows.

Foreign portfolio investors (FPIs) have returned as net buyers of Indian equities in November after several months of sustained selling. FPIs have pumped in Rs 53,739 crore in just six trading sessions between November 2 and 9. The turnaround comes after months of sustained selling. The buying follows nearly Rs 2.95 lakh crore in outflows between January and October 2026.