Why Infosys and TCS are the Best Hedge Against Fancy AI Stocks

AI or Artificial Intelligence is no more a buzz word among geeks. You do not need a qualification in engineering.

Nor do your coding skills need polishing. Without any of these, an AI tool like ChatGPT can serve you well.

Needless to say, I find even teenagers and senior citizens excited about what the AI tools can do for them.

AI stocks are current favorites for investors.

The use of AI has also grown exponentially in corporate India in the last few years.

Now India has been a leader in the deployment of digital public infrastructure. So, it's natural for the government to encourage companies to accommodate AI.

A pilot AI project developed by the Indian Railways, for instance, takes into account various factors such as train origin and destination, timings, class of accommodation, and availability of alternative trains.

With this information, it automates the best possible ticket allocation. So, AI has massively helped reduce ticket booking wait lists.

In agriculture, AI is being employed through techniques such as weather pattern modelling and geospatial imaging to optimise crop yields.

The medical field is improving medical image analysis to detect life-threatening illnesses earlier and enable more effective treatment plans.

In fact, as per NASSCOM, AI is expected to raise India's annual growth rate by 1.3% by 2035.

But most of the homegrown technology companies in India are not AI native. In other words, adopting AI can make them dependent on foreign technology partners.

Meanwhile, investors looking to buy fancy AI stocks may have to shell out a fortune in terms of valuations.

However, there is a yet another technological tailwind sweeping across Indian companies. And most of it is going unnoticed.

The National Quantum Mission (NQM), was approved by the Union Cabinet in April 2023.

At an outlay of Rs 60 bn over six years, the investments will be directed towards R&D for an innovative ecosystem in quantum technology within the country.

Quantum technology can be a big enabler for AI adoption. It can help swiftly tackle the most complex problems that once took years to solve.

For instance, it could be about tailoring medicines to individuals' unique genetic makeup, conducting real-time analysis of financial markets, or ensuring secure communication.

What makes the technology apt for Indian tech majors to focus on is the copious amounts of data that quantum technology can process quickly.

With NQM, India joins the league of six nations that includes the US, China, Finland, Austria, France, and Canada, which are leading the research in this field.

Globally, big players like IBM, Google, and Microsoft are leading the wave of Quantum Tech research.

India too is accelerating with about 15 government agencies, 25 service providers, 20 startups, and over 40 academic institutions active in the quantum technology space.

According to a Nasscom report, the industry would add about US$ 310 bn to the Indian economy by 2030.

To accelerate the adoption of quantum technologies, Indian IT companies are actively partnering with startups, companies and technical institutions to provide the know-how in quantum physics, setting up labs, and nurturing talent to build quantum applications.

Infosys has launched 'Infosys Quantum Living Labs' for all its customers across industries. Especially ones who would like to explore various use cases through quantum computing.

Currently, the company sees major applications for quantum computing solutions in logistics, cybersecurity, high tech, manufacturing, BFSI, healthcare, and others.

Similarly, TCS partnered with IIT Tirupati for research in quantum computing and quantum technology.

HCL Tech, Wipro, and Mphasis are also investing to develop innovative solutions in quantum tech.

So, unlike AI, applications and tools for quantum technology could be homegrown for Indian tech majors.

Of course, it may be a while before the technology finds wide scale commercial adoption like AI.

But with an early mover advantage, Indian tech majors can have a huge upside once the research on quantum technology begins to accelerate their product launches.

For investors, companies like Infosys and TCS offer the opportunity to ride the massive technology tailwind at relatively reasonable valuations.

No doubt, fancy AI stocks may be the current flavour of the stocks markets.

But considering the ignored Indian tech bluechips may serve well to ride India's homegrown tech boom.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)