Tech layoffs mount as AI spending climbs past $800 billion

Tech layoffs AI spending are moving in opposite directions across the largest US technology groups, with American tech companies cutting close to 140,000 roles this year while committing record sums to artificial intelligence, according to a Financial Times analysis of corporate filings and data from Challenger, Gray and Christmas.

The reductions represent more than one-third of announced layoffs in the US this year, FT reported Sunday. The cuts come as Amazon, Oracle, Meta, Microsoft and Alphabet are expected to spend well over $800 billion this year on AI-related projects, according to the newspaper.

Amazon, Oracle, Meta and Microsoft accounted for almost 50,000 of the eliminated roles, FT said. That figure is equal to about 6% of their combined corporate workforce, according to the report.

Why are tech companies cutting jobs while spending on AI?

Technology companies expanded rapidly during the pandemic-era surge in digital demand, then began reducing staff after that growth slowed, FT reported. Many large groups have continued to trim headcount while increasing expenditure on AI infrastructure.

AI infrastructure refers to the computing systems and technical capacity companies need to build, train and operate artificial intelligence products. For large technology firms, that spending can rise even as payrolls fall because capital budgets and staffing plans are separate management decisions.

The pattern differs from conditions in the wider US labor market. Hiring has slowed from the post-pandemic rebound, but government data cited by FT show the unemployment rate at 4.2%, still low by historical standards.

FT also cited layoffs earlier this year at Block, where Chief Executive Jack Dorsey said AI was altering the company’s staffing requirements. Some economists view that explanation with caution, arguing that AI can give executives a more acceptable way to frame cuts that also reflect earlier hiring decisions.

“The typical attitude of tech executives has been to say that AI allows us to gain efficiency rather than admit that they overhired,” Enrico Moretti, an economics professor at the University of California, Berkeley, told FT. “It’s an easy way out.”

Does AI spending always mean fewer workers?

Recent research cited by PYMNTS points to a more mixed employment picture. Corporate card company Ramp and workforce analytics firm Revelio Labs found that companies spending the most on generative AI increased staffing faster than those spending the least.

According to PYMNTS’ summary of the research, AI adopters increased headcount by 10.2% over the two years after adoption, with the gains attributed to companies classified as high-intensity spenders. Low-intensity adopters showed no statistically significant change over the same period, while entry-level headcount among high-intensity adopters rose 12%.

Some AI executives have also moderated earlier warnings about job losses. Anthropic Chief Executive Dario Amodei said last year that AI could eliminate half of all entry-level roles, according to a Wall Street Journal report cited by PYMNTS, but has since described a broader range of possible outcomes.

“They can do the same thing with less resources, and that leads to things like layoffs, or they can do more with the same amount of resources,” Amodei said, according to The Wall Street Journal. “But that requires creativity.”

For investors and policymakers, the current data show a sector reallocating resources at speed rather than a single labor-market outcome from AI. The largest technology companies are cutting tens of thousands of jobs, while separate research suggests the heaviest users of generative AI may also be adding workers in other parts of their businesses.

This story draws on original reporting from PYMNTS.