Tech layoffs and share prices don't add up: Cutting costs at financial peaks?

[Bubbajim]

Why it matters: Only in the last two weeks, we've reported on Microsoft laying off 1,900 employees, and Google sharing their intention to cut jobs to focus on their "big priorities." If we expand that timeframe back to just a couple more months, we've seen job cuts or announcements of intent from Meta, Intel, Unity, Amazon and more.

Numerous major tech companies are currently laying off hundreds or even thousands of staff, all while their stock prices are reaching all-time highs. Could this be the start of the great AI replacement? While layoffs from big tech companies are nothing new, there's a stark asymmetry this time that may indicate we're in a different era for business decision making. All the companies mentioned above (except for Unity) are experiencing their best stock performance in years, and in some cases, best ever.

Traditional theory would have layoffs happening as part of cost-cutting measures when a company or the wider economy is having a tough time. But these latest job losses are instead occurring when companies are at their richest and the US economy is performing pretty well.

According to the Bureau of Economic Analysis, part of the US Department of Commerce, the United States' GDP grew 3.3% in Q4 of 2023, on top of an already impressive 4.9% increase in Q3 of last year. The Nasdaq index is currently at its second highest it has ever seen, beaten only by a brief peak at the beginning of 2022. The overall unemployment rate stayed at a healthy 3.7% in December 2023, as reported by the Bureau of Labor Statistics.

If companies and the economy are performing well, it raises the question of what has caused almost 25,000 jobs to be lost in tech in less than a month of 2024 already? The most likely answer appears to be an across-the-board pivot to AI.

Google's ominous "ambitious goals" and "big priorities" memo where they announced their cuts was published just a week before they debuted Lumiere, their latest generative AI model. Google parent company Alphabet has seen a 57% increase in their share price in the last year.

In October of 2023, Meta announced cuts to their workforce, but then this month they announced their intention to buy 350,000 Nvidia GPUs for AI work. Meta has seen a 168% increase in share price in the last year.

In the last two months, Amazon has let go of hundreds of staff from Prime Video and MGM Studios divisions, as well as about one-third of staff at their streaming platform Twitch. Amazon shares are up 58% from one year ago.

The trend is not entirely uniform though. Of the latest job-cutters, Microsoft and Unity stand out. In Microsoft's case, most of their 1,900 layoffs have come in the wake of their acquisition of Activision Blizzard, and Unity's redundancies follow a troubled year for the company. So, in these instances, there does appear to be a more normal trimming-the-fat explanation. With that said, Microsoft are undoubtedly a key player in the AI space with their OpenAI partnership and Azure offering, so they may follow suit as their tech counterparts and continue to cut jobs away from non-AI ventures, too. Time will tell.

It's worth noting that the AI products that these companies are offering are not necessarily the root cause for job losses, but instead the huge pivot that companies are making to redirect funds towards AI work is leading to the layoffs. But it may just be the start of a worrying trend where businesses believe they need fewer persons in order to offer the same services to their customers.

Clearly, in the tech world at least, jobs are being cut even at a time that companies are doing exceptionally well. And in the majority of cases, these are from businesses that have been very upfront about their commitment to building and incorporating artificial intelligence into their products, services, and ways of working.

One has to wonder, if the often highly-trained and skilled workers of these ultra-competitive workplaces are becoming fodder for AI replacement, how well does this bode for millions of other employees across world?

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https://www.techspot.com/news/101670-tech-layoffs-share-prices-dont-add-up-cutting.html

 

[redgarl]

On the contrary, they over employed during the pandemic to prevent their competitors to acquire talent. Debt was cheap and they could do it, but now, that strategy is not working when interest rates are around 8% for loans.

Now they clean up their book and AI is driving the market and will drive up the market for a long time. That's why the stocks are going up and when the interest rates will drop, it will just get higher...

 

[maxxcool7421]

If all your doing is replacing entry level staff who literally READ a *script* that tells them how to do their web job and what to say to a customer and type on a keyboard their responses ... then yes .. that is what AI is replacing.

you cannot replace coders ; sales ; level-2 techs ; level-3 techs ; actual artists ; db-admins etcs...

the people being fired are all of these so this is just the same old boring stock-owner driven cash grabs that will eventually destroy the company they have invested in.

 

[Dimitriid]

The assertion is only partially accurate: There's certainly a justification found in moving towards AI to just cut down jobs but it's much more complex than that and at the same time, not complex at all: Capitalists will always seek to weaken labor and their dependence on employees by any means necessary.

So it's not just a cost-cutting measure via AI but a way to knock down the bargaining power of a perceived over-paid tech industry. If you blindly concede the Capitalist rhethoric of the free market dictating what should be the price of labor you have to completely ignore both intentionally coordinated and coincidentally but unlinked measures that new developments have always produced when it comes to cut down all kinds of jobs: From technological factors to geopolitical ones like globalization and offshoring, to variations like shifting towards a 'service economy' to now going back to a more basic perceived technological advance, the result is always the same: Every time there's any chance to just get rid of employees, companies will do so.

The only real way to fight back against such cuts in the long term is labor unions organizing to take over the means of production entirely.

 

[WhiteLeaff]

The only thing that matters to the person in control is to keep the shares well valued, continually beating market expectations. He receives stock bonuses, let's think about it a little.

 

[RudyBob]

When it was the auto industry you guys didn't care. I don't care now

 

[CrisisDog]

Good luck finding any jobs on the next ten years. Tech fields are replaced by AI and manual labor, like fast food, is getting robots. We’re all gonna need to find and start our own niche businesses to keep earning an income, won’t be able to rely on the big name corporations any more.

 

[Nobina]

I also believe many companies over-hired and now they're getting rid of those people. This doesn't apply to everyone, ofcourse. Diversity hires and such are the first ones to go if it comes down to firing people since they are probably useless.

 

[toooooot]

Good luck finding any jobs on the next ten years. Tech fields are replaced by AI and manual labor, like fast food, is getting robots. We’re all gonna need to find and start our own niche businesses to keep earning an income, won’t be able to rely on the big name corporations any more.

I kinda miss the times when huge corps were still cut in pieces sometimes.
There is no way only having megacorps is good for economy and the people

 

[VaRmeNsI]

Megacorps are the end result of centralised fiat money.

 

[Subset6]

Let’s chill with the ai hysteria, especially here. When the T1000 is in development call me.

 

[Theinsanegamer]

Nah, its a lot simpler. Companies vastly overhired during COVID. See also:

On the contrary, they over employed during the pandemic to prevent their competitors to acquire talent. Debt was cheap and they could do it, but now, that strategy is not working when interest rates are around 8% for loans.

Now they clean up their book and AI is driving the market and will drive up the market for a long time. That's why the stocks are going up and when the interest rates will drop, it will just get higher...

So now, with the economic recession that the government changed the definition of so they didnt have to admit it was a recession, companies are cutting back on employees and trimming massive amounts of fat. And by fat, it's mostly DEI hires whom fit racial or gender quotas as opposed to being able to actually do a job, or it's HR, basic sales people, or bloated middle management getting cut back.

Twitter is a great example, letting go of thousands of people yet still operating without issue. Most of the people they let go were either useless or were internet jannies that mopped wrongthink at the behest of government agencies. People can make fun of musk all they want, the likes of google, amazon, facebook, and the rest of the IT industry have followed twitter's example.

As a SIDE EFFECT of this, these companies are shown to be cutting costs way back, leading to a rising share price by short term traders, short sellers, and other forms of legalized gambling. The stock market stopped reflecting actual company value over a decade ago.

The assertion is only partially accurate: There's certainly a justification found in moving towards AI to just cut down jobs but it's much more complex than that and at the same time, not complex at all: Capitalists will always seek to weaken labor and their dependence on employees by any means necessary.

So it's not just a cost-cutting measure via AI but a way to knock down the bargaining power of a perceived over-paid tech industry. If you blindly concede the Capitalist rhethoric of the free market dictating what should be the price of labor you have to completely ignore both intentionally coordinated and coincidentally but unlinked measures that new developments have always produced when it comes to cut down all kinds of jobs: From technological factors to geopolitical ones like globalization and offshoring, to variations like shifting towards a 'service economy' to now going back to a more basic perceived technological advance, the result is always the same: Every time there's any chance to just get rid of employees, companies will do so.

The only real way to fight back against such cuts in the long term is labor unions organizing to take over the means of production entirely.

Thus turning the labor institution into an unprofitable, bloated beuracratic mess that will get destroyed in any sort of market that doesnt have extreme nationalistic protections. See also: Trabant, Zastava, Gaz, Zil, or any of the russian hardware makers in the IT space, UralVagonZavod, the list goes on.

Megacorps are the end result of centralised fiat money.

The east india company didnt need FIAT to dominate the west for centuries.

 

[DonquixoteIII]

Have a question - once you replace all the workers with AI chatbots or robotics assembly bots, who will be left to buy your product? Gamer-bots?

 

[atomicgirl]

Just know that terms like "diversity hires" or "DEI" are supremacist dog whistles. I'm referring to the two comments above. This is how supremacists explain to themselves why there might be brown and female faces within a sector or in positions of power/high visibility.

Have a question - once you replace all the workers with AI chatbots or robotics assembly bots, who will be left to buy your product? Gamer-bots?

There's actually an answer to this. Companies will just keep globalizing their customer base even further, turning increasingly to other markets outside domestic ones to keep afloat. For example, if you look at Hollywood, you'll see that our movies are no longer made for American audiences but foreign ones and are even being bankrolled by foreign companies.

I kinda miss the times when huge corps were still cut in pieces sometimes.
There is no way only having megacorps is good for economy and the people

All Americans have to do is lobby to get them broken up or stop giving them so much spending power. Instead of boycotting and lobbying, we're handing all of our money to these companies and, to make matters worse, letting them get away with murder (tax fraud, bailouts, etc.).

 

[Nintenboy01]

Have a question - once you replace all the workers with AI chatbots or robotics assembly bots, who will be left to buy your product? Gamer-bots?

and do CEOs still deserve massive salaries by that point? Most of them can probably be replaced by AI decision-making anyway.

 

[Nintenboy01]

Just know that terms like "diversity hires" or "DEI" are supremacist dog whistles. I'm referring to the two comments above. This is how supremacists explain to themselves why there might be brown and female faces within a sector or in positions of power/high visibility.

Yup, they're pretty brazen actually. Sad that prejudiced right-wingers have infested different corners of the internet.
I've also noticed they seem to be more tolerant of people of Korean/Japanese/Chinese or Taiwanese descent being in positions of power - it's the black people and Indians they seem to really despise.

 

[erickmendes]

(Really) disruptive tech always change the employment landscape. Every big market assessment company is literally saying that about AI for quite some time.

 

[Endymio]

To some otherwise excellent responses here, I'd like to add that the basic premise of the article is incorrect. Since November 2021, the Dow and S&P are both *down* not up, when adjusted for inflation.

The east india company didnt need FIAT to dominate the west for centuries.

The very response I was formulating when I read yours.

 

[VaRmeNsI]

The east india company didnt need FIAT to dominate the west for centuries.

The East India Company gained significant power due to the monopoly granted to it by the British government. The company received exclusive trading rights and privileges, allowing it to dominate trade in the Indian subcontinent and Southeast Asia during the 17th and 18th centuries. This monopoly contributed to the company's economic and political influence in the region.

 

[m3tavision]

Yup, they're pretty brazen actually. Sad that prejudiced right-wingers have infested different corners of the internet.
I've also noticed they seem to be more tolerant of people of Korean/Japanese/Chinese or Taiwanese descent being in positions of power - it's the black people and Indians they seem to really despise.

WHat you just typed is bigoted and racists & judgmental.

DEI is an racists ideology that goes 100% against Dr Martin Luther King's Ideology that all Humans are created equal and that YOU don't judge a person based on their skin color, but on their merits and how they handle themselves.


And... what you're implying is that (-up until now-) Companies purposely excluded women and people of color from their Employment. Yes?

Because there would be no need to set DEI goals to include people who weren't previously excluded.

 

[wiyosaya]

The East India Company gained significant power due to the monopoly granted to it by the British government. The company received exclusive trading rights and privileges, allowing it to dominate trade in the Indian subcontinent and Southeast Asia during the 17th and 18th centuries. This monopoly contributed to the company's economic and political influence in the region.

At least there's someone out there who sees things correctly.

 

[wiyosaya]

We've seen this paranoia before with every "disruptive" tech. History has shown that it is unfounded, and rarely pans out as the "visionaries" of the day claim it will.

Just because many companies are jumping on the AI fad, does not mean it will be successful. It will be interesting to see where this goes, and it will not surprise me if in a year or two or three, companies will dump their pursuit of the AI fad like the streaming industry is currently dumping the pursuit of the streaming fad and going back to the previous model of licensing their content to other outlets.

 

[RandomWAN]

"Numerous major tech companies are currently laying off hundreds or even thousands of staff, all while their stock prices are reaching all-time highs. Could this be the start of the great AI replacement? While layoffs from big tech companies are nothing new, there's a stark asymmetry this time that may indicate we're in a different era for business decision making. All the companies mentioned above (except for Unity) are experiencing their best stock performance in years, and in some cases, best ever."

There was an artificial bubble created when everyone was forced to work from home and the companies hired wildly in the face of this expecting to ramp up projects based around an imagined future where everyone is working from home. Also during this time, it was easy to get people to invest or borrow the money at low interest rates, so they could afford to just wantonly hire. A few years later, the glut of incompetentce hired paired with people returning to the workplace, rising interest rates and reduced investors, on top of a developing recession has driven them to cut the fat so they can maintain those numbers going into the future.

These are publicly traded companies and they are always seeking to keep the share price on an upward trajectory and part of this is making sure their profits keep rising, cutting operating costs wherever they can.

Meta made cuts as Zuckerberg quietly started admitting that the Metaverse isn't going to be a thing while disguising it under the pivot to the next big buzz tech. Google had adult day care attendees coupled with how they cancel projects and products left and right, so there's always some level of volatility with them. Amazon has constantly been looking for ways to cut their staff and maximize productivity which is why they invest so heavily in warehouse automation and they definitely have a huge interest in AI for running much of their online products.

The streaming service cuts are just part and parcel of most streaming platforms losing money due to fragmentation and trying to control how people consume the content; Netflix is the only one who's kept mostly clear from that trend.

Microsoft was a given with the acquistion since there would be redundancies and fat to trim from Activsion/Blizzard. They spent a huge sum on the aquisition and need to quickly turn it into a net profit. Unity was already hurting financially, hence their attempt to restructure their pricing model to increase their income. They made the huge misstep in that change and that has hurt them even further going forward, so they need to make more drastic changes in an attempt to maintain profitability.

 

[WhoCaresAnymore]

It makes complete sense. Anticipation of a rather large downturn in the economy. Inflation takes it's toll. All of the Wall Street big wigs are not very excited about 2024.

 

[Endymio]

The East India Company gained significant power due to the monopoly granted to it by the British government.

So you agree your initial contention that "centralized fiat currency" was responsible for the "megacorp" of the East India Trading Company was incorrect?

Just because many companies are jumping on the AI fad, does not mean it will be successful.

Agreed! The AI fad will die out like this whole Internet fad, if not sooner. And these horseless carriages will go the same way. They require constant maintenance, you know, whereas a good old "hay-burner" just needs to be brushed down every now and then.