Tech Layoffs Due To AI A 'New Normal' For Silicon Valley, Experts Say

As quarterly results for Microsoft, Meta, Google, and Amazon are anticipated in the coming days, industry analysts are closely watching the impact of AI investments on these tech giants.

Amidst a surge in tech industry layoffs this year, experts suggest a potential shift towards artificial intelligence (AI) as Silicon Valley companies reposition themselves. As per a report by AFP, the current job cuts, though not reaching the scale of late 2022 and early 2023, when the tech sector shed hundreds of thousands of jobs due to the post-pandemic hiring frenzy, indicate a new trend.

Referred to as the "year of efficiency" by Meta, the aftermath of the earlier layoffs has led to a strong performance of major tech stocks entering a highly anticipated quarterly earnings week. According to Wedbush analysts, the significant job cuts appear to be in the past, but a strategic realignment is underway, with big tech companies increasing investment in AI while reducing focus on non-strategic initiatives.

As quarterly results for Microsoft, Meta, Google, and Amazon are anticipated in the coming days, industry analysts are closely watching the impact of AI investments on these tech giants.

In the preceding year, the tech industry witnessed a loss of 260,000 jobs, as reported by layoffs.fyi, a California-based website tracking sector-wide layoffs, as per AFP. In the first four weeks of this year, 24,584 job cuts have been reported by 93 companies, including major Silicon Valley players, with the notable exception of Apple.

Google CEO Sundar Pichai signalled impending layoffs on January 18, emphasising the company's focus on new priorities, including AI. Pichai acknowledged the necessity of tough decisions to create capacity for strategic investments, leading to layoffs across various Google divisions.

While the current wave of layoffs is less severe than the previous year, companies like Amazon and Microsoft continue to implement job cuts, particularly in divisions affected by strategic shifts. Additionally, several other companies, including eBay, Salesforce, Duolingo, and numerous startups, have downsised their staff, with struggling startups constrained by a high-interest rate environment.

The founder of layoffs.fyi, Roger Lee, attributes the ongoing layoffs to the aftermath of over-hiring during the pandemic lockdown. He also notes a copycat effect, where companies follow suit in announcing layoffs, possibly seeking approval from investors.

Analysts estimate that approximately 20 per cent of job losses are attributed to AI-related restructuring. Silicon Valley, at the forefront of this trend, is witnessing the transformation of coding tasks through generative AI, reflecting the broader impact of AI on global business operations.

John Blevins, a guest lecturer at Cornell's SC Johnson College of Business, observes, "The wave of AI usage to improve business operations will affect every industry in every country. The tech sector, which moves faster than most others, is simply being altered by AI first."