Since the beginning of 2023, global tech companies have laid off more than 350,000 workers, according to data from the online tracker Layoffs.fyi. This includes US giants like Google, Apple, Amazon, Meta, and Microsoft.
Industry executives and experts have pointed to several reasons for the layoffs, including overhiring during the pandemic. But as tech firms plan to invest billions of dollars in generative AI technologies, there’s been another explanation for job cuts.
They need money to fund their AI spending.
In the coming years, companies will spend an estimated $1 trillion in combined generative AI investments that will go toward data centers, chips, and the power grid, according to a report from Goldman Sachs. To help fund these investments — and clear the way for the AI boom — more companies could cut jobs. While there’s been a mountain of speculation about if and when AI technologies like ChatGPT could displace workers, their near-term impact on job losses could be less about job replacement and more about the cost of AI investments. Of course, for workers who lose their jobs, the end result is the same.
This is already playing out.
In a February earnings call, Mark Zuckerberg told analysts that Meta had to lay off workers and manage costs “so we can invest in these long-term, ambitious visions around AI.”
In a memo published in January, Google CEO Sundar Pichai told employees that the company would be laying off more workers to make room for other investments, including AI.
“The reality is that to create the capacity for this investment, we have to make tough choices,” he wrote.
Last November, Amazon laid off hundreds of workers in its Alexa division. Daniel Rausch, vice president of Alexa and Fire TV, told his team via email that the company would be “maximizing our resources and efforts focused on generative AI,” leading it to “discontinue some initiatives.”
“A lot of this is really the shift and spend toward the AI revolution,” Dan Ives, a Wedbush Securities analyst, told The Hill in February after a series of tech layoffs.
It’s not just Big Tech. A survey of 1,200 CEOs from large companies across the globe, conducted last fall by FT Longitude on behalf of EY, found that 100% of their businesses were making or planning to make “significant investments in generative AI.” When asked how they planned to fund these investments, 71% of CEOs said they planned to “reallocate capital” from their technology budgets or other investment budgets — 34% said they planned to raise new capital.
“Whenever a new technology emerges and is found to be useful, companies decide to invest in that technology and sometimes invest less in other areas,” Oded Netzer, a Columbia Business School professor and AI expert, told Business Insider via email.
To be sure, these investments in AI are also expected to lead to significant hiring for AI-related jobs — even if AI technologies begin to replace some workers. Additionally, it remains to be seen how much AI spending will necessitate job cuts in other business areas, Carl Benedikt Frey, an economist at the University of Oxford, told Business Insider via email.
“I think it is true that companies are revising their business models in the light of recent developments in AI, cutting back on investment and jobs in other domains in the process,” he said. “But the magnitude of this shift is still hard to tell.”
The risks of AI job replacement remains to be seen
In the big picture, Netzer said he expects AI technologies to be an “enhancer rather than a replacer of jobs” in the years ahead.
“For many jobs, AI is likely to enhance our job, allowing us to spend more time on the things we enjoy doing and less time on the mundane,” he said.
He gave the example of a physician who has to devote precious time with patients typing notes on the computer.
“We are not far from AI making a transcription of the patient meeting,” he said. “But this in unlikely to lead to fewer doctors but rather the doctors being able to spend more quality time with the patient.”
However, some companies have begun citing AI as a reason for job cuts or hiring cutbacks. A Fiverr survey conducted in May of 1,001 US managers, business leaders, and decision-makers who had done layoffs in the prior six months found that the top reason cited for the layoffs was “new technology, where AI could increase efficiencies and reduce head count.”
Benedikt Frey pointed to translators as one profession that has seen fewer employment opportunities due to generative AI, per his research.
“We are indeed already seeing AI having an impact on jobs,” he said.
Have you lost your job due to AI? Have you used AI tools to save time at work? Share your experience with this reporter at jzinkula@businessinsider.com.
