AI hiring frenzy to fuel layoffs in other tech segments as firms strive to balance costs

As
tech
firms
prioritize
investments
into
artificial
intelligence
and
go
on
a
hiring
spree,
other
segments
are
likely
to
see
layoffs
continue
into
2024,
according
to
industry
experts.

More
than
20,000
tech
employees
have
already
lost
jobs
so
far
in
2024,
according
to
tracker

layoffs.fyi.

“Google
and
the
rest
of
Big
Tech
are
betting
big
on
AI
while
cutting
back
on
non-strategic
areas.
Layoffs
will
continue
to
happen
for
Big
Tech
in
some
areas
while
the
hiring
frenzy
in
AI
will
be
unprecedented
as
this
arms
race
continues
across
the
tech
world,”
Dan
Ives,
managing
director
at
Wedbush
Securities,
told
CNBC.

Google CEO Sundar
Pichai
last
week
warned
employees
there
would
be

more
job
cuts
this
year
as
the
company
continues
to
shift
investments
toward
AI.

“We
have
ambitious
goals
and
will
be
investing
in
our
big
priorities
this
year,”
Pichai
wrote
in
a
Jan.
17
memo
to
employees,
adding
that
the
management
was
gearing
up
to
share
its
AI
goals
and
objectives for
2024.
“The
reality
is
that
to
create
the
capacity
for
this
investment,
we
have
to
make
tough
choices,”
Pichai
said.

Google
slashed
hundreds
of
jobs
earlier
this
month
in
its
push
for
efficiency
and
to
focus
on
its
“biggest
product
priorities,”
as
it
plays

catch
up
with
rival


Microsoft
which
has
integrated
ChatGPT
into
Bing
search,
and
prompted
Google
to
beef
up
its
search
engine
with
AI
features.

“We’re
not
living
in
a
zero
interest
rate
environment
anymore.
And
now
they
really
need
to
find
ways
to
cut
costs
so
they
can
invest
here.
Training
AI,
deploying
AI
is
very
expensive.
And
I
think
that’s
what’s
happening
with
Google
today,”
said
Alex
Kantrowitz,
Big
Technology
founder,
on
CNBC’s
“Power
Lunch”
last
week.

“That
is
something
that
I
expect
other
Big
Tech
companies
to
follow,”
said
Kantrowitz
on
Jan.
18.

German
enterprise
software
firm


SAP
on
Tuesday
announced
it
would
restructure
about
8,000
roles
to

“increase
its
focus
on
key
strategic
growth
areas,
in
particular
business
AI”
in
2024.

“The
majority
of
the
approximately
8,000
affected
positions
is
expected
to
be
covered
by
voluntary
leave
programs
and
internal
re-skilling
measures,”
the
company
said,
adding
that
headcount
should
still
be
the
same
by
year-end.

Amazon,
which
has
been
aggressively
investing
in
AI,

laid
off
hundreds
of
employees
in
its video-streaming
and
studio
divisions
earlier
this
month.
Jobs
were
also

cut
in
its
Twitch
livestreaming
platform
and

Audible
audiobook
unit.

Mike
Hopkins,
who
oversees
Prime
Video
and
MGM
Studios
divisions,
said
that
the
firm
has
“identified
opportunities
to
reduce
or
discontinue
investments”
while
increasing
investment
in
other
areas
that
deliver
the
most
impact.

Amazon
Web
Services,
the
e-commerce
giant’s
cloud
service
business,
said
on
Jan.
19
it
would
likely
pump
2.26
trillion
yen
($15.24
billion)
in Japan by
2027
to expand cloud computing infrastructure
that
is
key
for
AI
services.

Other
companies
too
are
looking
to
cut
jobs
to
focus
on
their
AI-driven
businesses.

Vroom
would
axe
about
800
jobs,
according
to
the
U.S.-based
online
used-car
marketplace’s

regulatory
filing
last
week,
as
it
plans
to

focus
on
automotive
financing
and
AI
services
and
close
its
e-commerce
and
used-vehicle
dealership
businesses.

Earlier
this
month,

media
reports
said


Duolingo
would
cut
10%
of
its
contractors
as
the
language-learning
app
moves
toward
using
AI
to
create
content.

“A
couple
of
years
ago,
what
[firms]
would
have
done
is
just
hire
away
…
and
not
worry
about
where
they
had
to
cut
previously.
But
that’s
gone,”
said
Kantrowitz.

Mass
layoffs
began
in
2022
and
extended
through
2023
as
global
macroeconomic
headwinds
such
as
high
interest
and
inflation
rates

caused
consumers
to
pull
back
on
spending
amid
uncertainty
in
the
global
economy.