Tech layoffs have been piling up since the beginning of this year, but analysts say this could become the new normal in Silicon Valley amid a major shift toward artificial intelligence.
The scale of the layoffs is not on the same scale as in late 2022 and early 2023, when tech companies laid off hundreds of thousands of people. This is a reaction to the hiring frenzy during the pandemic, when companies increased their workforces as daily life moved online.
The shakeout, which Facebook owner Mehta called a “year of efficiency,” has been a success, with most big tech stocks now rising in a quarterly earnings week that promises to be a strong performance.
“The bulk of the big layoffs are in the rearview mirror,” Wedbush analyst Dan Ives told AFP.
“But now we're seeing a repositioning in the big tech industry to invest and double down on AI while cutting back on non-strategic efforts,” he said.
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AI will be in the spotlight for analysts as Microsoft, Meta, Google, and Amazon release their results in the coming days.
The technology industry lost a total of 260,000 jobs last year, according to layoffs.fyi, a California-based website that tracks the sector.
According to the site, just four weeks into this year, 93 companies have laid off 24,584 people so far.
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Once again, Silicon Valley giants make the list, with the notable exception of Apple, which has largely escaped the post-pandemic wave.
Google CEO Sundar Pichai told employees on January 18 that job cuts are planned as the search engine giant focuses on new priorities such as artificial intelligence. warned.
“We have ambitious goals and will invest in big priorities this year,” Pichai told staff.
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“The reality is that we have to make hard choices to create this investment capacity.”
Google has already laid off staff in a myriad of departments in January, including ad sales, search, shopping, maps, policy, core engineering, and the YouTube team.
Still, the shake-off is a far cry from when Google cut 12,000 jobs after Christmas last year.
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Around that time, Amazon also cut tens of thousands of jobs, a wave it continues to carry out with layoffs announced this month in its entertainment and streaming division.
Microsoft has announced it will lay off nearly 2,000 employees from its gaming division in the wake of its blockbuster acquisition of “Call of Duty” maker Activision Blizzard.
Ebay, Salesforce, Duolingo and dozens of other companies are also cutting staff, and struggling startups are being forced to cut staff due to lack of cash in a high interest rate environment.
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For Roger Lee, creator of the website layoffs.fyi, the main cause remains the aftershocks of overemployment when everyone is confined to their homes.
He also pointed to the copycat effect, where rival companies announce layoffs to seek the tacit approval of Wall Street and venture capitalists who approve of healthy spending.
“That may be encouraging tech companies to cut costs and cut staff,” Lee told US radio station NPR.
Wedbush's Ives says investors “prefer to have an adult in the room” when it comes to spending decisions.
He added: “This sends a smart message to investors and is usually well received by Wall Street.”
Layoffs.fyi estimates that around 20% of job losses are driven by AI and related restructuring.
Silicon Valley jobs are at the forefront, with some coding tasks primarily performed by generative AI.
John Blevins, a visiting lecturer at Cornell University's S.C. Johnson College of Business, said, “The wave of use of AI to improve business operations will impact every industry in every country.” .
“The technology sector is changing faster than most other sectors, but it is only being changed first by AI.”
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