Recent reports that AI has led to the loss of 100,000 jobs in Silicon Valley have drawn widespread attention. The reports indicate that the recent adoption of AI technology and strategic adjustments by companies in Silicon Valley have resulted in approximately 100,000 job losses, primarily affecting software engineers and operations support staff.
A reporter from *China Business Journal* noted that US tech giants have been frequently laying off employees this year. Recently, Amazon... The company plans to lay off approximately 14,000 employees to streamline operations and accelerate the development of artificial intelligence. Deployment; and Microsoft Intel has laid off more than 15,000 employees since May. More than 20,000 people were laid off in the three months this summer...
According to independent tracking website Layoffs.fyi, more than 218 tech companies have laid off employees this year, affecting over 110,000 people. Silicon Valley is undergoing a flurry of resource reallocation, redirecting saved human resource budgets to generative AI and large-scale modeling. Meanwhile, a report by consulting firm Challenger, Gray & Christmas shows that as of the end of October this year, US employers had announced 1,099,500 layoffs, a 65% increase compared to the same period last year. This is the highest number of layoffs announced during the same period in 2020.
It's worth noting that these tech giants that are laying off employees are actually doing quite well. For example, Amazon's revenue and net profit increased by 13% and 39% year-on-year in the third quarter of this year, respectively; Microsoft and Meta also saw growth of over 10% in the third quarter, and their stock prices have repeatedly hit new highs. Several industry insiders interviewed by reporters stated that while AI technology is indeed replacing traditional industries, the blame cannot be placed entirely on AI. Other important real-world factors include companies' contraction and correction after rapid expansion in previous years, the imbalance in the distribution of technological dividends, and the substitution effect of the gig economy.
Despite record-breaking earnings and stock price, layoffs are accelerating?
Amazon's recent announcement of laying off 600 employees in its artificial intelligence division has drawn attention. This follows Amazon's previous plan to cut approximately 14,000 jobs to streamline operations and accelerate AI deployment; this marks another large-scale layoff following the 27,000 job cuts in 2022.
In fact, Amazon is just a typical example of massive layoffs among Silicon Valley tech giants. Data shows that nearly 100,000 people have been laid off in Silicon Valley this year alone.
At the beginning of this year, Google was already focusing on cloud computing. Departments have drastically reduced design positions and focused resources on AI product development; Microsoft has laid off more than 15,000 employees since May, mainly affecting core departments such as Azure cloud, global sales and engineering; Intel, which is undergoing transformation, laid off more than 20,000 people in just three months this summer; and recently, IBM also announced that it will conduct a new round of layoffs in the fourth quarter of this year, which is expected to affect thousands of people.
In the past, large-scale layoffs by companies were often due to performance pressures. Facing declining business performance and operational difficulties, companies would cut staff and reduce costs. However, this year, these tech giants have generally performed quite well.
For example, Amazon's revenue and net profit increased by 13% and 39% year-on-year in the third quarter of this year, respectively, and it expects revenue to grow by more than 10% year-on-year in the fourth quarter. After the release of the financial report, Amazon's stock price surged by 13%. Google, Microsoft, and Meta also saw revenue growth of over 10% in the third quarter of this year, and their stock prices repeatedly hit new highs. Intel also ended six consecutive quarters of losses and returned to a growth trajectory.
Currently, most publicly announced layoffs by companies are related to AI. The affected positions are mainly concentrated in human resources, operations support, and some non-core R&D departments, with most layoffs aimed at making way for AI. An Amazon HR executive stated bluntly in an internal memo: the world is changing too fast, this generation of AI technology is disruptive, and companies must streamline to keep pace.
Multiple factors have converged, and AI cannot be blamed for this.
Since the pressure isn't stemming from performance targets, people have turned their attention to the recent surge in AI adoption. "The underlying logic is that large-scale AI applications will replace more people. Layoffs, to some extent, indicate a higher level of AI application, which can reduce costs, better capitalize on future trends, and improve company operational efficiency and profitability. It can be seen as a budget restructuring for the AI era," a technology observer who has long followed the AI field told reporters. This has indeed caused considerable anxiety for many; before truly witnessing the large-scale application and convenience of AI, their jobs are already facing a significant threat from it.
Is the massive layoffs in Silicon Valley really caused by AI?
Industry insiders believe that with the accelerated application of AI, some job replacements are a reality. Previously, companies like Amazon, Microsoft, and Meta attributed some of their layoffs to AI-generated code. For example, Microsoft stated that 30% of its code would be written by AI in the future, while Meta predicted that AI-generated code would account for over 50% in the future, leading to a decline in demand for positions such as software engineers.
However, beneath the guise of "AI replacing humans" lie many more real-world factors.
First, the rapid expansion of tech giants in previous years has led to a contraction and adjustment. During the COVID-19 pandemic from 2020 to 2022, Silicon Valley tech giants expanded on a massive scale. After 2022, due to the Federal Reserve's interest rate hikes and the economic downturn, a wave of layoffs ensued. For example, Amazon's number of employees more than doubled from 800,000 in 2019 to 1.6 million in 2021. Meanwhile, from 2019 to 2022, Google's number of employees expanded from approximately 110,000 to 187,000; Microsoft's from 150,000 to over 220,000; and Meta's from 45,000 to 87,000. After 2022, tech giants, entering a period of performance adjustment, have all begun a process of continuous layoffs and restructuring.
According to data from the US employment information website Layoffs.fyi, tech companies announced global layoff plans of approximately 160,000 people in 2022, 13 times that of the previous year; in 2023, about 1,191 tech companies laid off employees, totaling approximately 260,000, the highest level since the bursting of the dot-com bubble in 2001. The layoffs have continued into this year.
"Amidst large-scale expansion and recruitment, many positions were already in vain. Coupled with the sluggish global economy after 2022 and the Federal Reserve's 11 consecutive interest rate hikes from March 2022 to July 2023, major companies have resorted to layoffs or reducing recruitment," said the aforementioned technology observer. This wave of layoffs clearly exhibits characteristics of cyclical adjustment.
Industry insiders believe that the accelerated application of AI is unlikely to change. More fundamentally, AI is reshaping the workforce structure, with widespread hiring freezes for entry-level positions. Workers will need greater versatility to adapt to the AI era. In the future, middle managers and entry-level technical positions will be significantly impacted, with layoffs particularly pronounced in the software service outsourcing industry, as some jobs are replaced by AI-driven efficiency improvements. Simultaneously, the number of freelancers is increasing; 38% of the US workforce (approximately 64 million people) are freelancers, some forced into the gig economy due to unemployment.
"For job seekers, maintaining a capacity for learning and adaptability is key to meeting challenges, regardless of location; while for social policy, policy and education... " Both policies and systems need adaptive adjustments, requiring systemic reforms such as vocational training and optimization of the distribution system to address potential shocks,” the aforementioned technology observer stated.
(Source: China Business Journal)
