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Tech layoffs continue after ‘Year of Efficiency’


By Aditya Soni and Chavi Mehta

(Reuters) – Big Tech’s “Year of Efficiency” may be over but recent layoffs at Google and Amazon have signaled the firms will keep cutting jobs in 2024 as they make big investments in generative AI.

Analysts and industry experts believe the layoffs would be smaller and more targeted this year, with firms that are racing to catch up in the AI race more likely to make such moves to offset the billions of dollars they are spending on the tech.

Alphabet suggested that last week, saying it plans to invest in its “biggest priorities” as the Google parent laid off around a thousand employees across multiple divisions, including in its voice assistant unit and team responsible for Pixel and Fitbit.

Even its advertising business was not spared, with a report on Tuesday saying that hundreds of jobs were being cut at the unit.

Amazon.com laid off several hundred employees in its streaming and studio operations last week. Hundreds of jobs were also cut in its Twitch live-streaming platform and Audible audiobook unit, according to media reports.

Overall, tech firms have let go more than 7,500 employees so far in January, according to tracking website Layoffs.fyi.

“No company wants to get left behind by the AI revolution and they are all making sure they have these capabilities and are prioritizing them, even when it is at the expense of other initiatives,” D.A. Davidson & Co analyst Gil Luria said.

Both Google and Amazon are aggressively investing in their AI efforts. Google, which is trying to close the gap with Microsoft in the AI race, last month unveiled its long-awaited Gemini model, while Amazon is developing a model codenamed “Olympus” to compete with ChatGPT-maker OpenAI’s GPT-4 model.

HIRING PRIORITIES

Still, the total size of the layoffs is expected to be much smaller, compared with last year’s massive cuts, as tech spending picks up on the back of a more stable economy.

The tech sector shed 168,032 jobs in 2023 and accounted for the highest number of layoffs across industries, according to a report by Challenger, Gray and Christmas earlier this month.

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Those were led by tens of thousands of cuts at tech giants including Alphabet, Microsoft, Amazon and Meta, whose CEO Mark Zuckerberg termed 2023 as the “Year of Efficiency”.

“I don’t think there will be a similar reckoning. (Last year) tech firms were shedding all these employees they hired during the pandemic,” said GlobalData analyst Beatriz Valle.

“AI is driving a lot of dynamism but this only means that tech companies will be changing their hiring priorities.”

Some tech firms have been offering hefty salaries for AI roles, with a report saying last year that Match’s Hinge dating app was looking for a vice president of AI with a base salary of up to $398,000 a year and that Amazon was offering a top salary of $340,300 for a senior manager of applied science and genAI.

The spending is expected to deepen investor expectations on the returns from genAI, but the payoff for most companies could take longer to play out, according to analysts and experts.

So far, only Microsoft and chip giant Nvidia have emerged as big winners from the boom.

Daniel Keum, an assistant professor of management at the Columbia Business School, said past evidence shows it can take a decade or more to profitably make money from new technologies.

“The question is ‘is it different this time for AI?’ I am pessimistic, but many smart people believe it will be much shorter this time,” he said.

 

(Reporting by Aditya Soni, Chavi Mehta, Jaspreet Singh and Samrhitha A in Bengaluru; Editing by Anil D’Silva)

 

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