Tech Layoffs ‘Become Contagious’ Amid AI Investments

Tech firms have cut 34,000 jobs so far this year amid new investments in technology.

A total of 141 companies have cut staff this year as of Sunday (Feb. 11), according to Layoffs.fyi, which monitors unemployment in the tech sector. Among those companies are PayPal, eBay, Microsoft and Snap.

The cuts come as tech companies assess their staffing levels and conclude that “we’ve got a bunch of dead wood. And if we had a leaner organization we can do more,” Jefferies analyst Brent Thill told the Financial Times (FT) Sunday.

“The layoffs are going to continue and it may get worse. It’s become contagious,” Thill added.

Tech companies have been evaluating divisions where they want to prioritize investments and cutting staff in costly, but not core, areas, Daniel Keum, associate professor of management at Columbia Business School, said in the FT report.

An example of this is Amazon’s Twitch video streaming platform which eliminated hundreds of jobs this year. Keum added that this year’s job cuts have been accompanied by companies engaged in “active hiring.”

Meta, which has cut more than 20,000 since the end of 2022, has said hiring this year would be “minimal” though it will make “significant investments” in generative AI, which would include onboarding new talent.

This year’s job cuts aren’t solely confined to the tech sector. As PYMNTS wrote last week, companies like UPS and BlackRock have recently undergone significant layoffs, with AI playing a role in these decisions.

“However, many companies are hesitant to directly link technology with job cuts, instead focusing on the positive aspects of AI implementation,” that report said.

For example, while UPS acknowledged that technologies like AI played a part in its job reductions — the largest in its history — the company has said that AI is not replacing workers. Rather, for example, machine learning helps salespeople create proposals without relying on pricing experts for guidance.

“Estimating the true impact of AI on job cuts is challenging,” PYMNTS wrote. “According to outplacement firm Challenger, Gray & Christmas, U.S. companies have announced over 4,600 job cuts since May, either to free up resources for hiring individuals with AI expertise or because AI technology replaced certain tasks. “

But this estimate is thought to be an undercount of the actual number of job cuts. Senior Vice President Andrew Challenger suggests that many companies prefer to keep these layoffs under the radar, as publicizing them often brings about negative media attention.