SAN FRANCISCO: Layoffs in the tech industry have been accumulating since the beginning of the year, signaling a potential shift to a new normal for Silicon Valley with a heightened focus on artificial intelligence (AI), according to analysts.
While the scale of the recent cuts is not as extensive as seen in late 2022 and early 2023, when tech companies shed hundreds of thousands of jobs in response to the hiring surge during the pandemic, it reflects a strategic repositioning by major players. Dubbed the “year of efficiency” by Meta, the aftermath of the pandemic-induced hiring spree is now leading to a pivot toward AI and a reduction in non-strategic initiatives.
Wedbush analysts, including Dan Ives, believe that the era of massive layoffs is mostly behind us. Instead, there is a trend of repositioning in big tech, with increased investment and emphasis on AI while trimming down on less critical projects.
The upcoming quarterly earnings reports from major tech companies like Microsoft, Meta, Google, and Amazon are expected to shed light on their AI-related initiatives.
In 2023, the tech industry witnessed a total job loss of 260,000, as reported by layoffs.fyi, a California-based website tracking sector-related layoffs. In the first four weeks of this year, layoffs have already reached 24,584 across 93 companies. Notably, Apple has largely avoided the post-pandemic wave of layoffs.
Google’s CEO, Sundar Pichai, recently warned employees about upcoming layoffs as the company shifts its focus to new priorities, particularly AI. Google has already implemented staff reductions in various divisions, including ad sales, search, shopping, maps, policy, core engineering, and YouTube teams.
While the recent job cuts are significant, they are not as extensive as the massive layoffs observed in the same period last year. Other major tech companies, including Amazon and Microsoft, are also making strategic workforce adjustments.
Roger Lee, the creator of layoffs.fyi, attributes the current wave of layoffs to the aftermath of over-hiring during the pandemic and a copycat effect where companies follow suit after their rivals, seeking approval from Wall Street or venture capitalists.
Analysts like Ives suggest that investors appreciate prudent decision-making in spending, and strategic layoffs often convey a responsible approach, receiving positive reception on Wall Street.
Approximately 20% of the job losses are attributed to AI and related restructuring, according to estimates by layoffs.fyi. Silicon Valley, where AI plays a significant role, is witnessing changes in job dynamics, especially in tasks involving generative AI.
John Blevins, a guest lecturer at Cornell’s SC Johnson College of Business, emphasizes that the increasing use of AI to enhance business operations is a widespread trend affecting industries globally, with the tech sector being at the forefront of this transformation.