Fears about artificial intelligence rapidly disrupting the Business Process Outsourcing, or BPO, and Information Technology, or IT, services sector seem overstated in the near term, Wedbush Securities said in a note Wednesday.
The analysts said that while AI has been a major narrative affecting stock prices, the actual impact on business fundamentals has been limited so far. Much of the slowdown seen over the past two years is tied to companies cutting budgets related to post-COVID over-spending, rather than AI replacing existing services, they said.
The analysts said that the main takeaway from their call with the BPO and IT services industry was that "near-term AI disruption fears appear meaningfully overstated relative to fundamentals."
In terms of individual companies, Globant's (GLOB) key strength is its deep industry expertise and strong relationships with enterprise clients, making it resilient against newer AI-focused competitors, the analysts said.
Cognizant (CTSH) is investing heavily in AI and expanding through mergers and acquisitions, but these efforts might take longer to materialize than the industry expects, whereas TaskUs (TASK) appears well-positioned for both growth and potential acquisition, they said.
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