Rising AI investments drive layoffs at US tech firms

US tech firms with rising investments in artificial intelligence (AI) continue to accelerate layoffs in a bid to streamline operations, especially tech giants, by downsizing their workforces to reduce costs and restructure.

AI has become one of the most prominent causes for layoffs, as more and more firms, especially in the tech sector, aim for high productivity with fewer workers.

Around 40% of layoffs announced in May were due to AI-related restructuring, following a 7% rate in January, 10% in February, 25% in March, and 26% in April, according to data from Challenger, Gray & Christmas.

This year, the tech sector saw the highest layoffs, while the number of layoffs in the sector during the first five months of the year surged 66% versus the same period last year, reaching 123,653 workers.

The trend in layoffs is reportedly not solely driven by technology, as excessive hiring after the COVID-19 pandemic, cost pressures, and restructuring efforts played certain roles in these decisions, experts say.

US software firm Oracle said its workforce shrank 21,000 over the past year amid its restructuring efforts to prioritize AI. The company said its full-time workforce declined to 141,000 from 162,000 as of May 31 in a filing with the US Securities and Exchange Commission (SEC).

Software firm GitLab announced a shift to lay off workers and make AI a core component of its business model, reducing its workforce by around 14% by laying off 350 workers to restructure its infrastructure to meet the needs of its AI-based workloads — the firm also plans to withdraw from 22 countries and streamline its management layers.

US tech giant Meta laid off 8,000 workers and plans to shift 7,000 workers into new AI-related positions. Meta had laid off 10% of its workers in the Reality Labs unit in January and the firm followed in March by an additional round of layoffs affecting hundreds of workers across the firm.

Tax and financial software maker Intuit said it will lay off 17% of its full-time workforce to focus more on other strategic priorities like AI initiatives.

Cisco decided to lay off around 4,000 workers to reallocate resources towards AI and other growth areas.

Cloudflare let go over 1,100 workers to redesign its organizational structure in the AI era.

Cryptocurrency exchange Coinbase said it will lay off around 14% of its workers due to market conditions and the shift to AI, while fintech firm PayPal plans to reduce its workforce by 20% over the next three years and adopt AI into all its operations.

American social media firm Snap will lay off around 1,000 workers, or 16% of its workforce, and close over 300 open positions in line with its profitability goals, as AI is reportedly reducing repetitive tasks and accelerating business processes, CEO Evan Spiegel said.

Companies like Angi, Atlassian, Block, Crypto.com, and Wix are also among those announcing layoffs this year amid their AI-related restructuring efforts.

*Writing by Emir Yildirim in Istanbul