In the beginning of February 2026, a sudden and rapid sell-off occurred in global technology markets, and the hardest hit area was Indian IT stocks, with approximately ₹2.5 lakh crores being wiped off in three days.
The individual at the centre of this chaos was Rahul Patil, the CTO of Anthropic, who has drastically changed the way companies see software with his work on the company’s recent release of Artificial Intelligence software tools.
When Anthropic upgraded its Claude product, it was not just releasing an improved chatbot product but introduced “agentic” plugins, meaning that the Artificial Intelligence can perform an entire workflow from beginning to end independently. The AI can now look at a legal document, write up a contract, create and test software code, and analyse data with little to no input from humans.
For investors, this indicated that there was a much larger picture developing; Artificial Intelligence was at a point where it was going to replace vast amounts of traditional software and outsourcing services.
The reaction was immediate; India’s Nifty IT Index dropped nearly 8%, while share prices of larger companies fell dramatically due to uncertainty about the viability of their long-standing business models.
The “Patil effect” within Anthropic
Since taking the reins as Chief Technical Officer in October 2025, Patil has been focused on making Claude faster, cheaper and more scalable.
He has pushed teams to enhance performance on expensive chips; optimized memory usage; and lowered costs associated with computing. Additionally, he has combined engineering teams strategically between the infrastructure, product and AI researchers.
This has allowed Anthropic to offer direct-to-enterprise AIs as always-on systems instead of simply offering access to models. The collective transformation of Anthropic as a result of this initiative is now referred to on Wall Street as the “Patil effect.”
It has transformed Claude from a tool to that of a colleague.
Why did investors freak out?
Investors were not concerned with improving software. Instead, they worried about diminishing demand.
Typical SaaS type companies charge per user, whereas traditional IT service firms charge per employee. With one AI performing the work of numerous professionals, there will be a need for fewer licenses from businesses and fewer engineers.
Analysts labelled this as the start of “SaaS-pocalypse”, an existential crisis for software-as-a-service companies.
Adding more fuel to the fire, Palantir claimed its AI would allow a company to complete extremely complex ERP migrations within weeks, rather than months or even years, by encroaching on yet another purportedly safe industry.
Impact on IT Giants in India
India relies on its large worker population to deliver service. Now, that model seems to be in danger.
Tata Consultancy Services and Infosys saw their stock prices drop. Other companies such as Tech Mahindra also dropped.
The biggest worry is that if teams are replaced with AI solutions, India’s method of generating revenue using large workforces will need to change over the long term.
It’s a question of whether AI poses a risk or a benefit.
There are already job losses resulting from the increased adoption of AI technologies. New graduate hiring has decreased, the number of entry-level positions available in areas such as testing, maintenance, and compliance has dropped.
ALSO READ: Why Big Tech is pouring billions into India’s AI race — and what it means for the economy
Is this another temporary panic?
Industries that are regulated (Finance, Healthcare, Defense) will require human intervention in overseeing the proper usage of these systems. There will be a need for governance and validation and ethical oversight of AI systems. “Human In The Loop” roles typically require domain-specific knowledge rather than just code; and thus will create new jobs that require workers that are skilled outside simply writing software.
While Indian companies are investing in AI, there is some concern about whether this will accelerate.
Some analysts consider this a repeat of the DeepSeek shock from 2025, which did not meet all expectations in full anyway. They believe companies won’t abandoned existing software overnight.
However, unlike past episodes of concern, Claude’s technologies pose a direct threat to how companies perform work, not only how AI-based solutions are created.
The change has been made.
Innovations brought forth by Rahul Patil were not the source of the crisis; they were simply ways to demonstrate the crisis as it existed.
In summary, for Indian IT, it is now clear that you must change rapidly in order to remain relevant in the Artificial Intelligence (AI)-first universe or be left to trail behind as unimportant.
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