Google, Amazon, Microsoft, Meta and other tech giants are laying off employees faster than they hired during the pandemic. The million-dollar question remains - is it 'Artificial Intelligence' or the unstable macroeconomic conditions to be blamed for this calamity?
According to Layoffs - a website that monitors employment losses in the tech industry, the top 5 tech giants and 91 other tech companies fired over 150,000 employees in 2022.
So far, in 2023, Alphabet, Amazon, Meta and Microsoft have announced laying off over 50,000 employees.
After the financial crisis in 2008 and the dot-com bubble burst in 2000, 2022 was the worst year for the tech industry.
During the pandemic, tech companies saw a major upswing in sales as people bought equipment for their new work-from-home setups.
Understandably, the firms struggled to fill positions quickly enough. These companies competed for tech experts in Silicon Valley's talent wars, frequently lavishing exorbitant benefits on their new and prospective hires. Executives acted as if the celebration would never cease as revenues surged.
Tech stocks fell more than 30 per cent in 2022, more than the overall market drop of 20 per cent. Analysts believe tech stocks will take a major hit in the coming months as the Federal Reserve is likely to increase interest rates further until 2024.
The questions naturally arise - how did such highly capable and brilliant business leaders with heaps of data miscalculate the situation so badly? And why are the job cuts still ongoing?
The 'economic reality' has shifted as the robust demand for the goods and services provided by technology corporations, which peaked during pandemic lockdowns, has subsided.
Consumer behaviours have stabilised while the prevalence of teleworking has decreased. Technology firms are now experiencing rising costs, but revenues are no longer increasing as quickly as anticipated. Profits have decreased significantly for some of these giants. A recession is being anticipated.
In a note to staff, Stripe's leaders stated that it would lay off 1,000 employees, or 14 per cent of its workforce, saying, "We over-hired for the world we're in."
Google CEO Sundar Pichai stated in a memo to colleagues that the business is cutting off 12,000 jobs, "We hired expecting a different economic reality than the one we face today." The CEO noted that artificial intelligence would be a key area going forward.
"I take full responsibility for the decisions that led us here. Over the past two years, we've seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today," Sundar Pichai was quoted as saying by New York Times.
Amazon stated that a 'unique and unprecedented macroeconomic climate' forced it to focus on what appealed most to its consumers. The 18,000 layoffs announced by Amazon are the largest staff reduction in the history of Tech firms, albeit they only account for slightly more than 1 per cent of the company's employees.
Kelly Nantel, the Global Media Relations official of Amazon, told CNN, "As we've gone through this, given the current macro-economic environment (as well as several years of rapid hiring), some teams are making adjustments, which in some cases means certain roles are no longer necessary. We don't take these decisions lightly, and we are working to support any employees who may be affected."
By the third quarter of 2022, Meta had raised its workforce from 25,000 employees in 2017 to 87,000. Since the pandemic's inception, when Meta had 45,000 employees, the number had nearly doubled.
Twitter, on the other hand, has laid off around 3700 employees after the recent takeover by Elon Musk. This layoff was mainly a cost-cutting measure that led to many more employees self-resigning.
Among the Big Five tech companies, Apple is the only one that hasn't announced widespread layoffs. Although there were few dismissals, the company hasn't made the record-high cuts seen at the other four tech giants.
Microsoft's payroll has also grown by 77,000 in three years and by 97,000 since 2017, reaching 221,000 after the most recent fiscal quarter. The corporation has announced a 10,000-job reduction or 5% of its staff. Additionally, Intel has laid off almost 20 per cent of its 120,000 employees workforce.
However, some experts claim that the current economic climate rather than recent advancements in AI are to blame for the layoffs at Microsoft and other tech companies. Although the advent of AI could have far-reaching consequences for the labour force in the future, blaming it for the recent wave of layoffs in the technology sector would be unfair.
Semafor revealed earlier this month that Microsoft is planning to invest USD 10 billion in OpenAI, the company behind the wildly successful program ChatGPT.
Furthermore, market volatility has increased due to the war, and rising interest rates in the United States and the United Kingdom can be traced partly to the fighting. This has led to a funding crunch for the technology sector, which has led to widespread layoffs this year.
As a result of their dismissal, multiple dissatisfied and furious laid-off employees went on social media to voice their anger.
One such employee had a very uniquely unfortunate experience. A software engineer had been fired from 3 big tech companies within only four months. In September of last year, he was dismissed from his position at Snap. He then started working for Amazon but got fired within two months. After that, he went to work at Google, but unfortunately, he was laid off from there too.
"Last week, in a span of less than 24 hours, my husband and I were both laid off (Twitter and Lyft). It was a hard day. I know we'll be back on our feet soon," posted a laid-off employee on Twitter.
So what is the future for fresh graduates who aspire to have a career in the tech industry?
Firstly, the constant layoffs now suggest an excess supply of tech talents against available jobs. New graduates will have to deal with tougher competition. Moreover, experts believe there will be additional 30,000 to 40,000 layoffs in the first quarter of 2023.
Along with that, the tech giants announced a hiring-freeze which shatters all hopes of a glorious career in tech. Hence, the weather seems a bit gloomy for tech career aspirants.