The Indian IT sector is experiencing significant challenges, with the Nifty IT index declining 17% in 2026 due to concerns over potential disruptions from advancements in artificial intelligence (AI). Major players such as Infosys, Tata Consultancy Services (TCS), and Wipro have all seen their stock prices fall by over 20% year-to-date. The recent unveiling of Anthropic's Mythos model, which promises enhanced software development capabilities, raises alarms among analysts about its impact on demand and valuations in the IT sector. According to Kotak Institutional Equities, the model represents a notable shift in performance metrics, potentially leading to a 3%–3.5% annual growth headwind for IT services. This could worsen if future AI models continue to advance rapidly. While Tier 1 companies like Infosys have higher exposure to application services, mid-tier firms may gain market share from slower-moving incumbents. Despite current pressures, some analysts remain optimistic about the sector's ability to adapt, recalling a similar period of skepticism in 2016-2017 when firms transitioned towards digital services.