Analyst Kumar Rakesh Picks IT Companies as AI Market Changes

The market is changing because of Artificial Intelligence (AI). Analyst Kumar Rakesh is choosing specific IT companies he believes will do well. He explains AI's impact in two steps: first, making current work faster, and later, changing how businesses work and creating new jobs.
By Newsroom | Technology, Business |

Market Uncertainty Drives Strategic IT Investments

The current market environment, marked by significant shifts in stock values, signals a deeper uncertainty surrounding the impact of Artificial Intelligence (AI). Analyst Kumar Rakesh, affiliated with BNP Paribas, has adopted a focused investment approach, backing specific information technology (IT) companies. This strategy comes as the broader market grapples with the evolving landscape shaped by AI's increasing integration into business operations. The rapid stock price movements observed are seen not as random events, but as indicators of underlying market apprehension and the profound changes AI is ushering in.

Understanding the AI Impact: A Two-Phase Process

Kumar Rakesh has outlined a two-phase model for understanding how AI is being implemented within companies.

  • The initial phase involves the automation of existing business processes. This is viewed as an acceleration of trends already initiated by Robotic Process Automation (RPA).

  • The second phase, which is expected to unfold more gradually, involves business transformation and the creation of new work. This phase is contingent on the further evolution of AI models.

This perspective suggests a nuanced view of AI's immediate versus long-term effects on the IT sector.

Specific IT Company Performance and AI's Role

Rakesh identifies Persistent Systems as a company poised to be a significant beneficiary of AI implementation. He also notes that some companies have already begun to build capabilities and engage with clients on their AI transformation journeys, with Infosys being cited as an example.

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However, the current market sentiment indicates that the full impact of AI on the IT sector's established leaders is still developing. While some firms are taking an early lead in generative AI (Gen AI) capabilities and client engagement, the precise implications for all major IT players are not yet fully clear.

Kumar Rakesh bets on select IT names amid AI-led volatility - 1

AI Adoption Fuels Mid-Sized IT Firms

Evidence from January 2026 indicates that AI adoption is increasingly influencing the performance of mid-sized IT firms, particularly in sectors like aerospace, manufacturing, and infrastructure engineering. Companies are observing a shift from AI experimentation to programs focused on execution-driven transformation. This AI-led approach is reportedly providing a boost to these firms, even amidst a generally muted demand environment.

  • Cyient has noted increased AI traction in specific engineering programs.

  • Mphasis has identified AI-enabled modernization as a key driver of demand.

  • Tata Elxsi has highlighted the growing use of AI in automotive design, embedded systems, and media workflows.

These developments suggest that AI's influence extends beyond large enterprises and is creating new opportunities for various segments of the IT industry.

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Expert Perspective on AI and IT Services

Kumar Rakesh, in his role as an Analyst at BNP Paribas, has articulated a measured view on AI's impact on traditional IT services.

"We think Persistent Systems is the key beneficiary of AI implementation."

"But the business transformation inflationary new work will take longer because these models have to evolve a little more."

This outlook suggests a period of near-term pressure for some IT service providers, balanced by a more favorable long-term picture as AI capabilities mature and integrate more deeply into business strategies. The market's current volatility, according to Rakesh, reflects this inherent uncertainty and the evolving nature of AI integration.

Conclusion: Navigating AI's Transformative Wave

The investment strategy proposed by Kumar Rakesh underscores the significant impact of AI on the IT sector. His analysis points to a dynamic market where AI is driving both challenges and opportunities. The phased implementation of AI, starting with process automation and moving towards broader business transformation, requires careful observation. Companies demonstrating early capabilities in generative AI and client engagement, such as Persistent Systems and Infosys, are positioned to benefit. Concurrently, AI-led execution is proving to be a vital factor for mid-sized IT firms. The prevailing market volatility, therefore, appears to be a reflection of the industry's ongoing adjustment to AI's transformative potential, with near-term pressures potentially giving way to a more balanced long-term outlook as AI technologies continue to develop.

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Frequently Asked Questions

Q: Why is the IT market changing?
The market is changing because Artificial Intelligence (AI) is becoming more important in how businesses work.
Q: Which IT companies does Kumar Rakesh like?
He likes companies like Persistent Systems. He also sees Infosys working with clients on AI.
Q: How will AI change businesses?
First, AI will make current work faster. Later, it will change how businesses operate and create new types of jobs.
Q: Are smaller IT companies also seeing changes?
Yes, some mid-sized IT firms are doing better because they are using AI to improve their work and help clients.