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The stock market indices—Nasdaq and S&P 500—have all reached all-time highs (hope y’all are invested and raking in good passive income), primarily thanks to tech companies like Microsoft, Meta, and Alphabet achieving unparalleled market valuations.
Just a couple of weeks ago, Microsoft became the most valued public company with a $2.89 trillion market cap.
There’s something worrisome behind the curtains—the tech sector is currently experiencing an increase in layoffs this month. Higher valuations with fewer resources? Interesting!
Last year wasn’t great either—as many as 260,000 jobs were wiped off. If you’re in the tech space, you’d know that this is the most challenging the industry has gotten since the dot-com bubble burst in the early 2000s.
So, what’s the reason for massive layoffs? Well, I’ve scoured what companies have been saying and all of them in so many words have blamed poor consumer demand, high inflation, and an exaggerated recruitment phase during the pandemic for these job reductions.
At the time of writing, the aforementioned tech giants have all recovered from the perplexing pre-pandemic performance levels, plus there’s been a 50% reduction in inflation when compared to the previous year. All this has surely improved the confidence of customers like you and me.
Despite this, the beginning of this year saw nearly 100 tech companies, including juggernauts such as Amazon, Meta, Google, Microsoft, Salesforce, and TikTok, collectively laying off around 25,000 employees. This is concerning, to say the least.
To give you a quick rundown:
- Microsoft and SAP laid off around 1,900 and 8,000 employees
- eBay cut thousands of jobs while fintech startup Brex has let go 20% of its employees
- Earlier this month, Amazon, Google, Discord, and Unity also announced job cuts to streamline their operations and adapt to market demand
- Amazon slashed positions across MGM Studios, Prime Video, audible, and Twitch divisions
- Unity and Discord are cutting 25% and 17% of their workforce
Interestingly, these layoffs coincide with the upcoming tech earnings season, where Amazon, Alphabet, Meta, Apple, and Microsoft are set to disclose their quarterly results—I’d look at it as a means to appease investors and other stakeholders because whether we like it or not, and regardless of the big-picture effects, the companies have been able to reduce costs in response to various economic uncertainties.
The bottom line is: can you blame a company for focusing on productivity and efficiency?
The New Reality
As I pointed out, we can link these job cuts to budget planning and strategic initiatives of the companies in the upcoming year.
Of course, there has been an increased investment in AI that has made it necessary for companies to cut down costs. Investment in AI is on the rise, and it’s no secret that it may soon result in more workforce reductions.
Phil Spencer, Microsoft’s gaming CEO, explained that the layoffs were aimed at minimizing areas of overlap and are part of a bigger plan followed by the acquisition of Activision Blizzard.
Similarly, Google recently introduced new AI products to improve Google Chrome. Amazon is also increasing its investments in AI, and SAP has also stated about diverting its focus more to business AI.
If you think tech industries are the only ones facing layoffs, how about this—Citigroup, a company in the banking sector, has announced a 10% workforce cut. Then there are media companies like Levi Strauss and Paramount that have also announced layoffs to enhance efficiency and streamline operations—just like the rest of them.
All in all, it’s undoubtedly a social responsibility rather than a business-driven incentive, so we can only guess whether these companies will be able to protect jobs as we move towards a more AI-driven work environment.
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