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

As tech firms prioritize investments into synthetic intelligence and go on a hiring spree, other segments are seemingly to see layoffs proceed into 2024, in accordance to trade consultants.

More than 20,000 tech workers have already misplaced jobs to date in 2024, in accordance to tracker layoffs.fyi.

“Google and the remainder of Big Tech are betting huge on AI whereas reducing again on non-strategic areas. Layoffs will proceed to occur for Big Tech in some areas whereas the hiring frenzy in AI will probably be unprecedented as this arms race continues throughout the tech world,” Dan Ives, managing director at Wedbush Securities, advised CNBC.

Google CEO Sundar Pichai final week warned workers there could be more job cuts this year as the corporate continues to shift investments towards AI.

“We have formidable objectives and will probably be investing in our huge priorities this yr,” Pichai wrote in a Jan. 17 memo to workers, including that the administration was gearing up to share its AI objectives and aims for 2024. “The actuality is that to create the capability for this funding, we’ve got to make powerful selections,” Pichai stated.

Google slashed hundreds of jobs earlier this month in its push for effectivity and to give attention to its “largest product priorities,” as it performs catch up with rival Microsoft which has built-in ChatGPT into Bing search, and prompted Google to beef up its search engine with AI options.

“We’re not residing in a zero rate of interest setting anymore. And now they actually need to discover methods to reduce costs to allow them to make investments right here. Training AI, deploying AI may be very costly. And I feel that is what’s taking place with Google immediately,” stated Alex Kantrowitz, Big Technology founder, on CNBC’s “Power Lunch” final week.

“That is one thing that I anticipate other Big Tech corporations to comply with,” stated Kantrowitz on Jan. 18.

German enterprise software program agency SAP on Tuesday introduced it might restructure about 8,000 roles to “increase its focus on key strategic growth areas, in particular business AI” in 2024.

“The majority of the roughly 8,000 affected positions is anticipated to be lined by voluntary go away applications and inner re-skilling measures,” the corporate stated, including that headcount ought to nonetheless be the identical 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 have been additionally cut in its Twitch livestreaming platform and Audible audiobook unit.

Mike Hopkins, who oversees Prime Video and MGM Studios divisions, stated that the agency has “recognized alternatives to scale back or discontinue investments” whereas growing funding in other areas that ship essentially the most affect.

Amazon Web Services, the e-commerce big’s cloud service enterprise, stated on Jan. 19 it might seemingly pump 2.26 trillion yen ($15.24 billion) in Japan by 2027 to expand cloud computing infrastructure that’s key for AI providers.

Vroom would axe about 800 jobs, in accordance to the U.S.-based on-line used-car market’s regulatory filing final week, as it plans to focus on automotive financing and AI services and shut its e-commerce and used-vehicle dealership companies.

Earlier this month, media reports said Duolingo would reduce 10% of its contractors as the language-learning app strikes towards utilizing AI to create content material.

“A few years in the past, what [firms] would have performed is simply rent away … and never fear about the place that they had to reduce beforehand. But that is gone,” stated Kantrowitz.

Mass layoffs started in 2022 and prolonged by means of 2023 as international macroeconomic headwinds such as excessive curiosity and inflation charges caused consumers to pull back on spending amid uncertainty in the worldwide financial system.