Why Silicon Valley Tech Giants Are Still Laying off Employees

After a year of large-scale layoffs, layoffs at the largest companies in the technology industry have quietly begun in the first month of 2024.

Earlier this year, Google laid off hundreds of employees and indicated that further layoffs would be on the way. Amazon subsequently cut hundreds of jobs in its Prime Video division. Meta quietly trimmed its middle management staff. Microsoft is also laying off 1,900 people in its video game division.

Despite a surge in sales and profits and a surge in stock prices, layoffs have continued. Technology industry insiders and analysts say the contrast reflects the two major challenges facing the industry: adapting to the frenzied expansion of the workforce during the epidemic on the one hand and actively entering the field of artificial intelligence on the other.

Now, instead of hiring thousands of employees every quarter, these companies are investing billions of dollars in developing artificial intelligence technologies that they believe may one day be worth trillions of dollars.

Meta’s CEO Mark Zuckerberg said on a conference call with analysts last week that his company must cut jobs and control costs “so that we can invest in these long-term, ambitious visions around artificial intelligence.”. He also said he has realized that “we run better as a leaner company.”

From late 2019 to 2023, technology companies scrambled to keep up with an explosion in consumer demand as people stuck at home purchased new computers and spent more time online. Apple, Amazon, Meta, Microsoft, and Google parent Alphabet added more than 900,000 jobs combined.

When this boom ended, they were forced to adjust. Meta, Amazon, Microsoft, Google, and Apple will cut approximately 112,000 jobs in 2021 and 2022 respectively. But they are still much larger and more profitable than they were before the pandemic began.

Today, these five companies employ 2.16 million people, an increase of 71% compared with before the epidemic. Together, they generated $1.63 trillion in sales in the most recent fiscal year, up about 81% from five years ago.

Wall Street rewarded them. Over the past year, Meta, Amazon, Microsoft, Google, and Apple have grown in market value by nearly $3.5 trillion.

Although some other companies are also seeing significant layoffs, employment across the tech industry is still expected to rebound. Tech jobs grew for the second month in a row in January, adding 18,000 workers, according to CompTIA, a technology education and research organization. Its unemployment rate is 3.3%, below the national average of 3.7%.

“We go through cycles where you see a strong focus on innovation, and then the pendulum swings and there’s a strong focus on breaking even,” said Tim Herbert, chief research officer at CompTIA. “But when I see Amazon laying off Alexa employees, or Google laying off employees on its Pixel phones, I know they’re focused on margin. They’re laying off as many people as they can and redeploying resources.”

Generative AI has changed everyone’s business priorities. After OpenAI’s chatbot ChatGPT became popular, the technology, which can answer questions, create images, and write code, became an overnight sensation.

The biggest tech companies are scrambling to hire engineers to build artificial intelligence systems. According to CompTIA, there were 180,000 AI-related jobs in the United States last year, including positions in software development, semiconductor engineering, and cloud computing. Job openings in the field of artificial intelligence have increased this year.

These employees are helping Microsoft, Google, Amazon, and Meta improve chatbots and build other artificial intelligence systems. Apple is hiring artificial intelligence engineers as the company develops its artificial intelligence products to be released later this year.

“Our approach has been, so to speak, to do the work first and talk about the work later, rather than bragging about it beforehand,” Apple CEO Tim Cook said on a conference call with analysts last week. “But we’ve There’s something we’re excited about.”

These companies are spending billions of dollars on expensive chips and supercomputers needed to train and build artificial intelligence systems. By the end of the year, Meta expects to purchase 350,000 specialized chips from chipmaker Nvidia, at an estimated cost of $30,000 each.

While generative AI is being pushed forward, other areas are shedding jobs. Google has reduced the number of people working on augmented reality technology. Meta laid off nearly 20,000 people last year, and it has been laying off some of its project managers, who oversee different projects and keep teams on track.

In the two years between 2020 and 2021, Amazon doubled its workforce to 1.6 million as it tried to keep up with a surge in e-commerce orders. That hiring boom increased corporate jobs from 200,000 to 380,000. The company has since cut about 30,000 corporate jobs and about 50,000 other positions, according to a person familiar with the matter. The company’s leadership has made it clear that these positions will not be reinstated anytime soon.

“We want to keep headcount under control,” Amazon Chief Financial Officer Brian Olsavsky said on a media call last week.

After laying off more than 1,000 employees in January, Google warned employees that rolling layoffs could continue into this year. Ruth Porat, chief financial officer of Google parent Alphabet, said on a conference call with analysts last week that bringing in top engineers was an exception.

Compared with similar companies, Apple has taken a restrained approach to hiring during the pandemic. But last year, as sales of iPhones, iPads, and Macs declined, the company began shrinking its workforce. For the first time in at least 15 years, the company reported a decrease in its headcount, although it avoided widespread layoffs.

Apple announced 3,000 layoffs at the end of its most recent fiscal year, largely through attrition and by encouraging some managers to give more rigorous annual reviews, according to three people familiar with Apple’s strategy.

Microsoft was the only tech company not to report a headcount reduction. The company employed 221,000 people at the end of fiscal 2023, the same as its post-pandemic peak.

Investors have rewarded Microsoft for its stability. Last month, it overtook Apple as the world’s most valuable company, with a market capitalization now exceeding $3 trillion.

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