In a continuation of what some experts are calling the “Year of Efficiency,” major tech players Google and Amazon have recently announced layoffs, signalling a trend expected to persist throughout 2024 as they divert resources towards substantial investments in generative artificial intelligence (AI).
Analysts anticipate that this year’s layoffs will be more targeted and smaller in scale compared to the massive job cuts witnessed in 2023, a report by news agency Reuters said.
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Firms striving to catch up in the AI race are seen as more likely to make strategic workforce reductions to offset the significant financial commitments they are making in this transformative technology.
Last week, Alphabet, Google’s parent company, revealed plans to invest in its “biggest priorities” as it laid off approximately a thousand employees across various divisions, including the voice assistant unit and teams responsible for Pixel and Fitbit. Even the advertising business faced reductions, with reports indicating that hundreds of jobs were cut.
Amazon.com followed suit, announcing layoffs of several hundred employees in its streaming and studio operations. The Twitch live-streaming platform and Audible audiobook unit also saw significant job cuts, according to Reuters.
According to tracking website Layoffs.fyi, the tech industry has already shed more than 7,500 jobs in January alone. Industry observers attribute these layoffs to the intense competition in the AI sector, with companies unwilling to be left behind in what many see as the AI revolution.
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D.A. Davidson & Co. analyst Gil Luria commented on the situation, and was quoted by Reuters stating, “No company wants to get left behind by the AI revolution, and they are all making sure they have these capabilities and are prioritising them, even when it is at the expense of other initiatives.”
Both Google and Amazon are making significant investments in their AI initiatives. Google recently unveiled its Gemini model, aiming to close the gap with Microsoft in the AI race. Amazon is also developing a model codenamed “Olympus” to compete with OpenAI’s GPT-4 model, the creator of ChatGPT.
However, the total size of the layoffs is expected to be considerably smaller than the massive cuts witnessed in 2023. The tech sector saw a staggering 168,032 job losses last year, making it the industry with the highest number of layoffs.
GlobalData analyst Beatriz Valle noted, “AI is driving a lot of dynamism, but this only means that tech companies will be changing their hiring priorities,” the news agency added.
Some companies are offering substantial salaries for AI roles, with reports highlighting Match’s Hinge dating app offering a vice president of AI position with a base salary of up to $398,000 (Rs 33,166,080) a year, and Amazon providing a top salary of $340,300 (Rs 28,322,948) for a senior manager of applied science and genAI.
While the spending on AI is expected to deepen investor expectations, analysts caution that the returns from generative AI may take longer to materialise for most companies. Only Microsoft and chip giant Nvidia have emerged as significant beneficiaries of the AI boom so far.
Daniel Keum, an assistant professor of management at the Columbia Business School, expressed scepticism about the rapid profitability of AI, stating, “The question is, ‘Is it different this time for AI?’ I am pessimistic, but many smart people believe it will be much shorter this time.”
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