Infosys Stock Plummets Amidst AI Code Generation Fears

Infosys's share price experienced a significant decline, closing with a modest drop of 0.26% on February 16, 2026, marking a four-day cumulative loss of 9%. This recent fall has driven the stock 17% lower in February alone, its biggest monthly drop since April 2022. The shares are now down 26.60% from their one-year peak of ₹1,861, placing Infosys among the worst large-cap performers and pushing its valuation below ₹6 lakh crore.

Investor sentiment has weakened across the tech sector due to concerns that artificial intelligence (AI) tools could allow enterprises to generate code in-house, reducing reliance on third-party vendors. These worries have now extended to financial services, transportation, and logistics. Although analysts do not foresee immediate impacts, the perceived threat of AI posing tough competition to software makers has intensified.

Despite the market downturn, mutual funds collectively increased their stake in Infosys. At the end of the December quarter, 45 mutual funds held a 22.12% stake, a 2.07 percentage point increase from the previous year. SBI Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund, and UTI Mutual Fund are among the key holders.

Brokerage firms suggest that while AI may enable in-house code generation, vendor ecosystems remain crucial for systems integration, cybersecurity, and performance optimization. They note that self-built software still represents a small portion of total software spending. Near-term earnings visibility for IT services remains stable, with AI potentially becoming a revenue-accretive opportunity rather than a disruption in the medium term.