New-age vs old-age tech vs IT
Valuations of technology firms in the US and India are being fiercely debated among analysts, experts, and investors. They make comparisons between the gaps between US-based mega-cap tech firms, and India’s IT and “new-age” tech stocks. DSP Mutual Fund’s recent report highlights that Indian IT stocks underperformed the Nasdaq 100 by roughly 48 per cent since the Artificial Intelligence (AI) trade took off. There is overvaluation in US tech rather than in Indian IT. The former is “overbought, over-owned, and overvalued,” and the latter “under-owned, oversold, and underperforming.”
Saddled, and nestled between the two is India’s young but growing cohort of “new-age” tech firms such as Zomato, Nykaa-parent FSN, PB Fintech, Delhivery, MapmyIndia, and Nazara that allow exposure to platforms, logistics, and gaming. Their revenues, and stock prices seem to follow the trajectories of the US-tech growth stories. But the former’s valuation logic is dominated by price-to-sales ratio, rather than price-to-earnings one, and unit economics, rather than cash flows. Thus, there is a mismatch when one compares Indian new-age tech to America’s old-age tech, and the latter to Indian IT.
In a July 2025 note, Jarvis Invest places Indian IT stalwarts such as TCS and Infosys at about 22-6 times earnings with 12-15 per cent five-year earnings growth. Compare these to global tech names like Nvidia and Apple, which are at 35-90 times earnings with 20-40 per cent growth. The analyst firm feels the IT stocks are “reasonably valued,” and global tech ones “overvalued, (with) high expectations.” Clearly, the valuations of core tech firms (especially beyond AI) are at different junctures. In addition, tech in New York, and Bengaluru are not the same thing, even though they are often lumped together.
In the US, a handful of names drive earnings and sentiments. These include Apple, Microsoft, Alphabet, Amazon, Meta, and Nvidia, and are accompanied by a long tail of suppliers of software services, cloud infrastructure, payments, and semiconductor. As of early December, the Nasdaq 100 traded at a price-to-earnings multiple of 34, which was above its five-year average of 27-33 times. The S&P IT was at almost 40 times earnings, versus a five-year average closer to 27-35 times. The Nifty IT index is still overwhelmingly an IT services basket, with names such as TCS, Infosys, HCL Tech, and Wipro.
The Nifty IT trades at about 27 times earnings, and 7.2 times book value, with a dividend yield just under three per cent. Recent reports suggest that the Nifty IT fell 16.7 per cent in terms of total returns this year, while the broader Nifty 500 eked out a small gain. While Indian IT looks cheaper than US tech, investors are not paying for the same thing. In the former, they buy exposure to products and platforms with embedded pricing power and, in the latter, they are excited about billing-hour leverage on global IT budgets.
In a recent report, Goldman Sachs outlines how the AI trade amplified an already-extreme concentration in the US tech indices. Valuation excesses, index concentration, and investor exuberance combine to give global equities some of the “early stage bubble” characteristics of the late 1990s. But Goldman Sachs concludes that the global stocks are “not yet” in a classic bubble because the earnings and balance sheets are stronger, and the universe of the beneficiaries is narrower. BlackRock expects AI to dominate markets in 2026, and remains constructive on US equities. It does flag the risks related to heavy concentration, crowded positioning, and high leverage among hedge funds that can lead to sharp corrective episodes, as was evident in this November’s pullback.
The tech market has narrowed in the US because an extraordinary volume of global capital is concentrated in a small cluster of mega-cap companies. Their dominance creates a self-reinforcing cycle. As the prices of these stocks rise, index funds allocate more capital to them, and their size and liquidity attract institutional money. The narrowness is thus a product of excess capital clustering around perceived certainty rather than a shortage of opportunities. Hence, at the top sit firms with immense pricing power, deep cash reserves, and the ability to fund multi-year investment cycles.
India’s IT market is narrow for a different reason. Here, capital has thinned because the sector’s core growth is under questioning. Large IT exporters deliver steady margins, strong balance sheets, and dependable cash flows, but the investor appetite is restrained by doubts about the future of their labour-led, billing-hour-driven model in an era defined by automation, cloud consolidation, and generative software. This hesitation is reinforced by a cyclical slowdown in global tech budgets after years of digital spending. Unlike the US, where money crowds into dominance and scale, India reflects a deficit of conviction about the durability of businesses.
Another interesting layer to look at is what the investors pay for. At the top in the US market are the AI-adjacent mega-caps. Nvidia trades at rich price-to-earnings, and price-to-sales multiples. Microsoft, Alphabet, and Amazon combine earnings from mature cloud and advertising franchises with options on AI productivity tools and foundation models. Apple sits apart, sustained more by brand, ecosystem, and buybacks, and trades at a high multiple. A second tier of “old tech” names like Cisco, Intel, IBM, and Oracle are the previous generation’s market darlings, and are now valued more for their high cash flows, and huge dividends, rather than growth.
A third tier of high-beta chip and software plays, from AMD and Broadcom to Arm and more-specialised AI software firms, makes the valuation debate acute. Their earnings are less diversified, business models more dependent on the durability of the current upgrade cycle, and their share prices more sensitive to changes in the narrative about AI spending and macro conditions. In India, the classic IT services group is the equivalent of US old tech, except that it is treated as a growth sector. But this feeling can change due to the disruptions, and the impact of generative AI.
The Indian new-age consumer tech and fintech names give a more direct parallel with the US. Zomato and PB Fintech are profitable, but still priced on revenue growth and market share. Nykaa, Delhivery, and Nazara face intense competition, shifting regulation, and consumer demand cycles, which makes their high price-to-sales ratios fragile, and unstable. These businesses rely on domestic discretionary spending, and regulatory stability. They may become the future darlings, and replace the software giants.
