Why AI is Making IT Stocks Go Down

Rajasekar Maruthasalam
6 hours ago
2 min read

People are confused. AI is the newest, most exciting technology. You would think IT companies (the companies that write code and manage computers) would be making more money than ever.

Instead, their stock prices are falling. Why?

It is not because the technology is bad. It is because the way these companies make money is breaking. Here is the simple reason why.

1. They Get Paid for "Time"

Most big IT companies make money by charging for hours.

The Old Way: If a big bank needs a new app, the IT company sends 100 people to work on it for 6 months. The bank pays for every hour those people work.
The AI Way: New AI from companies like Anthropic can do that same work in a few minutes.
The Problem: If the work only takes 10 minutes instead of 6 months, the IT company cannot charge for all those hours anymore. Their sales disappear.

2. The "Lose-Lose" Choice

IT companies are stuck in a hard spot:

Choice A: They use AI to work faster. If they do this, they have to tell the client, "We finished in one day!" and they get paid much less money.
Choice B: They don't use AI. If they do this, a new, small company will use AI and take the client away by offering a cheaper price.

Either way, the big IT company makes less money than before.

3. Fewer Workers Needed

In the past, these companies hired thousands of young graduates to do simple tasks like testing software or fixing small bugs.

Now, AI can do these simple tasks perfectly and for almost no cost. This means these companies don't need all those workers anymore. Investors are worried because a company with fewer workers and smaller projects is worth less money.

4. Investors are Scared

In the past, people bought IT stocks because they thought these companies would grow forever. Now, people are worried that these companies will just be "helpers" that don't make much profit. When people get worried, they sell their stocks, and the price goes down.

Summary Table

The Old Way	The New AI Way
Paid for many hours of work	AI does work in minutes
Needs thousands of workers	Needs only a few smart people
Large, expensive projects	Small, fast, cheap projects