U.S. Immigration Policy Shifts and India's IT Sector: Assessing Long-Term Risks for Major Firms

The Trump administration's imposition of a $100,000 annual fee on H-1B visa petitions has sent shockwaves through India's IT sector, a cornerstone of the country's global technology services economy. This policy, announced in September 2025, is poised to reshape talent flows, profitability, and competitive positioning for firms like Tata Consultancy Services (TCS), Infosys, and Wipro. For investors, the challenge lies in assessing how these firms adapt to regulatory headwinds while maintaining growth in a rapidly evolving global landscape.

Financial Implications: A Costly Disruption

The $100,000 fee, applied to both new applications and supplement petitions, has immediate financial consequences. According to a report by Bramesh Tech Analysis, TCS and Infosys could face annual costs of $812 million and $492.6 million, respectively, under the new regimeTrump's $100,000 H-1B Visa Fee - brameshtechanalysis.com^[2]. This represents a significant strain on margins for firms that have historically relied on H-1B visas to deploy junior and mid-level engineers to U.S. clients. The fee exceeds the median salary of many H-1B holders ($118,000), making it economically unfeasible for firms to sponsor mid-level or entry-level professionalsIndian IT Firms To Benefit Amid Proposed Changes In H-1B Visa^[4].

While Indian IT firms have reduced H-1B sponsorship by 46% over five yearsIndian IT firms slash H-1B usage by 46%, sponsorships down 44 in 5 years^[3], the fee hike accelerates their pivot to alternative models. For instance, TCS's H-1B filings dropped from 10,525 in 2021 to 5,505 in 2025Indian IT firms slash H-1B usage by 46%, sponsorships down 44 in 5 years^[3], reflecting a broader industry trend. However, the abruptness of the policy change leaves little room for gradual adjustment, forcing firms to either absorb costs or pass them to clients.

Talent Strategy: From Onsite to Offshore and Nearshore

The fee's most profound impact lies in its potential to disrupt traditional talent deployment models. Indian IT firms are increasingly prioritizing local hiring in the U.S. and expanding nearshore operations in Canada, Mexico, and Latin AmericaIndian IT Firms Slash H-1B Sponsorship by 46% as US Giants Surge^[1]. For example, Infosys has increased its U.S. onshore workforce to 24% of its total, while HCLTech reports 80% of its U.S. staff as local hiresTrump's $100,000 H-1B Visa Fee - brameshtechanalysis.com^[2]. This shift reduces dependency on H-1B visas but introduces new challenges, such as higher labor costs and the need for extensive training programs.

Simultaneously, firms are accelerating offshore delivery from India. The National Foundation for American Policy (NFAP) notes a 56% decline in H-1B use by Indian IT firms since 2015Trump's $100,000 H-1B Visa Fee - brameshtechanalysis.com^[2], with automation and AI-driven solutions enabling remote service delivery. However, time-zone differences and data security concerns remain hurdles.

Global Competitiveness: Diversification as a Lifeline

The U.S. market, which accounts for over 62% of Indian IT firms' revenueIndian IT Firms Slash H-1B Sponsorship by 46% as US Giants Surge^[1], is no longer the sole growth driver. Companies are expanding into Europe, the Middle East, and the Nordics to mitigate U.S. policy risks. TCS, for instance, has boosted its revenue share from Europe and the Middle East, while Infosys has grown in Australia through joint venturesIndian IT Firms Slash H-1B Sponsorship by 46% as US Giants Surge^[1]. This diversification aligns with rising demand for AI and cybersecurity services in these regions.

Yet, the shift is not without risks. Stricter data sovereignty laws in the EU and Middle East require firms to invest in localized infrastructure, increasing operational complexity. Moreover, U.S. tech giants like Amazon and Microsoft are now dominant H-1B sponsorsIndian IT Firms To Benefit Amid Proposed Changes In H-1B Visa^[4], potentially outpacing Indian firms in securing top-tier talent for specialized roles in AI and cloud computing.

Investment Risks and Strategic Rebalancing

For investors, the key risks lie in margin compression and regulatory uncertainty. The $100,000 fee could force firms to restructure their business models, potentially reducing profit margins by 2-3%Trump's $100,000 H-1B Visa Fee - brameshtechanalysis.com^[2]. Additionally, proposed reforms like a flat wage floor for H-1B holders may exacerbate regional cost disparities in the U.S., further complicating hiring strategiesIndian IT Firms Slash H-1B Sponsorship by 46% as US Giants Surge^[1].

However, opportunities exist for firms that pivot effectively. Macquarie Research highlights that Indian IT companies could benefit from tighter U.S. visa regulations by strengthening their offshoring modelsIndian IT Firms Slash H-1B Sponsorship by 46% as US Giants Surge^[1]. Firms with robust automation capabilities and diversified revenue streams—such as TCS and HCLTech—are better positioned to weather these changes.

Strategic Insights for Investors

1. Diversify Exposure: Investors should overweight firms with strong nearshore and offshore capabilities, such as TCS and Infosys, while monitoring those with higher U.S. on-site dependencies.
2. Focus on Innovation: Prioritize firms investing in AI, cloud, and cybersecurity, as these areas are less vulnerable to visa policy shifts.
3. Monitor Regulatory Developments: Stay attuned to potential legal challenges to the $100,000 fee and future H-1B reforms, which could alter the landscape.

Conclusion

The Trump administration's H-1B fee hike is a seismic shift for India's IT sector, testing the resilience of firms that have long relied on U.S. immigration policies. While the immediate financial burden is significant, the long-term survival of these firms hinges on their ability to diversify geographically, invest in automation, and adapt to evolving regulatory environments. For investors, the path forward lies in identifying firms that can navigate these challenges while capitalizing on emerging opportunities in global markets.