IT Shares Decline as US Overhauls H-1B Visa Allocation System
Shares of several IT companies witnessed a mild decline on December 24 after the Donald Trump administration announced a significant change to the H-1B work visa allocation process. This marked the second consecutive session of losses for IT stocks, following gains over the previous four trading sessions.
According to the US Department of Homeland Security, the long-standing lottery-based system for issuing H-1B visas will be replaced with a new framework that prioritises skilled and higher-paid foreign professionals. Under the revised approach, visas will no longer be granted purely through random selection. Instead, applications will be weighted to improve approval chances for candidates offered higher wages and roles requiring advanced expertise.
The administration said the new rule aligns with its broader immigration reforms. A press release noted that employers would also need to comply with a Presidential Proclamation requiring an additional $100,000 fee per visa as a condition of eligibility. The new system is scheduled to come into effect on February 27, 2026, and will apply to the upcoming H-1B cap registration season.
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Historically, H-1B visas have been awarded through a lottery mechanism. This year, Amazon emerged as the largest recipient, securing more than 10,000 approvals. Other major beneficiaries included Tata Consultancy Services, Microsoft, Apple and Google. California continues to have the highest concentration of H-1B visa holders in the US.
Supporters of the H-1B programme argue that it is a crucial pathway for hiring talent in essential sectors such as healthcare and education. They believe the programme supports innovation, economic growth and helps US employers fill specialised roles where domestic talent is limited.
However, critics claim that H-1B visas are often used for entry-level roles instead of senior positions that genuinely require specialised skills. While the programme aims to prevent wage suppression and protect American workers, critics argue that companies sometimes classify jobs at lower skill levels to reduce costs, even when experienced professionals are hired.
Currently, the annual cap on new H-1B visas is set at 65,000, with an additional 20,000 visas reserved for applicants holding a master’s degree or higher.
What brokerages say
Brokerages have recently evaluated the potential impact of the revised H-1B visa framework and believe the effect on Indian IT companies may remain limited.
CLSA noted that the higher costs apply only to fresh applications and not to renewals or the existing H-1B workforce, which helps contain the downside risk. In a worst-case scenario, CLSA estimates a potential impact of up to 6% on FY27 earnings for Indian IT companies under its coverage, assuming companies bear the full cost of new applications.
Motilal Oswal Financial Services said the initial impact is likely to be felt from FY27, as H-1B lotteries and filings typically take place between the fourth and first quarters of the financial year. The brokerage also highlighted that Indian IT firms have reduced their reliance on H-1B visas over the past decade and added that the policy change could face legal challenges in US courts.
Nomura estimated a worst-case margin impact of around 10 to 100 basis points for the companies it tracks. It added that higher visa costs could encourage greater offshoring and increased automation by clients and IT service providers. Additionally, the growth of Global Capability Centres (GCCs) in India is expected to accelerate as companies seek cost-efficient alternatives.
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