Nomura and UBS have weighed in on the recent sell-off in IT services stocks, saying the concerns may be overdone. Nomura said it is not easy to replace SaaS products and IT vendors with new apps because companies focus on reducing risk, not just cutting costs or chasing innovation. They said, "Tech adoption for newer and unproven technologies remains slow given concerns about compliance, regulatory, business and continuity risks." Nomura added that the current fall in IT stock prices is a result of investors pricing in the end of old business models before new ones show gains. Despite the pain, stocks with high free cash flow and dividend yields of 4-5% will likely find a support floor soon. Nomura noted valuations are now below the 12-year average and 12-39% below the 5-year average. Their top stock picks are Infosys, Coforge, and eClerx. UBS focused on terminal value — the long-term cash flow that impacts stock valuations. They acknowledged some near-term overreaction but said concerns on long-term growth remain valid. UBS said companies advancing non-linear growth, investing in IP and platforms, and aiding AI adoption will protect their terminal value. They stressed adaptability is key, monitoring how companies adjust pricing, staffing, and acquisitions amid structural changes. UBS stated, "The prevailing tone in the market seems to presume a rapid, broad-based automation of enterprise workflows by agentic AI, rendering the traditional IT services model structurally weak." However, UBS believes there will be a transition from linear staffing to solutions, platforms, outcomes, and problem solving. This evolution will shape the future of IT services stocks.