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Why do big tech companies keep cutting jobs?| GuyWhoKnowsThings


After a year of major layoffs, job cuts at the tech industry's largest companies have been extended into the first month of 2024.

Google started the year with layoffs of several hundred employees and a promise of more cuts to come. Amazon followed by cutting hundreds of jobs at its Prime Video department. Goal Middle management was quietly reduced.. Microsoft too cut 1,900 jobss in its video game division.

Layoffs continued even as sales and profits increased and stock prices soared. That disconnect, technology experts and analysts say, is a reflection of an industry facing two major challenges: coming to terms with the frenetic expansion of the workforce during the pandemic and, at the same time, taking aggressive steps to develop artificial intelligence.

Now, instead of hiring thousands of people every quarter, companies are spending billions to develop artificial intelligence technology that they believe could one day be worth trillions.

Mark Zuckerberg, Meta's chief executive, said on a call with analysts last week that his company had to lay off employees and control costs “so we can invest in these ambitious, long-term visions around AI.” to realize that “we operate better as a more efficient company.”

From late 2019 through 2023, technology companies struggled to keep up with an explosion in consumer demand, as people stuck at home splurged on new computers and spent much more time online. Apple, Amazon, Meta, Microsoft and Alphabet, Google's parent company, added a total of more than 900,000 jobs.

When that boom ended, they were forced to adapt. Meta, Amazon, Microsoft, Google and Apple shed about 112,000 jobs from their respective peaks in 2021 and 2022. But they were still much larger and more profitable than before the pandemic began.

Today, the five companies employ 2.16 million people, 71 percent more than before the pandemic. Combined, they generated $1.63 trillion in sales in their most recent fiscal years, about 81 percent more revenue than five years earlier.

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

Employment in the broader tech industry, despite notable cuts at several other companies, is still positioned for a recovery. In January, technology achieved its second month of job growth, adding 18,000 workers, according to CompTIA, a technology research and education organization. Its unemployment rate of 3.3 percent is below the national average of 3.7 percent.

“We go through these cycles where you see an intense focus on innovation and then the pendulum swings and there's an intense focus on the bottom line,” said Tim Herbert, director of research at CompTIA. “But when I read that Amazon is cutting Alexa staff or Google is cutting staff on its Pixel phone, it tells me there's a focus on margins. “They are cutting what they can and redistributing resources.”

Generative AI has altered everyone's business priorities. The technology, which can answer questions, create images and write code, became an overnight sensation after OpenAI chatbot ChatGPT blew up In popularity.

The largest technology companies are rushing to hire engineers to build artificial intelligence systems. Last year, there were 180,000 job openings in the United States related to AI, including positions in software development, semiconductor engineering and cloud computing, according to CompTIA. The number of vacant positions in AI has expanded this year.

Those employees are helping Microsoft, Google, Amazon and Meta improve chatbots and build other artificial intelligence systems. Apple is hiring AI engineers, as the company develops its own AI offering that will launch later this year.

“Our modus operandi, so to speak, has always been to work and then talk about work and not get ahead,” Apple CEO Tim Cook said on a call with analysts last week. “But we have some things we're really excited about.”

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 have purchased 350,000 specialized chips from chipmaker Nvidia, which cost about $30,000 each.

The push toward generative AI has coincided with cuts elsewhere. Google's layoffs reduced the number of people working in augmented reality technology. Meta, which laid off nearly 20,000 people last year, has been cutting some of its program managers, who oversee different projects and are responsible for keeping teams on schedule.

Over two years, 2020 and 2021, Amazon doubled its workforce to 1.6 million employees as it tried to keep up with a surge in e-commerce orders. The hiring included increasing the number of corporate jobs from 200,000 to 380,000. Since then, it has eliminated about 30,000 corporate jobs and about 50,000 other jobs, according to a person with knowledge of the changes, and its leadership has made clear that those jobs will not come back anytime soon.

“We're looking to maintain headcount,” Amazon Chief Financial Officer Brian Olsavsky said during a media call last week.

After laying off more than a thousand employees in January, Google warned employees that rolling layoffs could continue throughout the year. The exception would be bringing in the best engineers, said Ruth Porat, chief financial officer of Alphabet, Google's parent company, during a call with analysts last week.

Unlike its peers, Apple showed restraint in hiring during the pandemic. But last year, when sales of iPhones, iPads and Macs fell, the company began reducing its workforce. For the first time in at least 15 years, it reported that its overall number of employees declined, even as it avoided major layoffs.

The 3,000 fewer jobs Apple reported at the end of its most recent fiscal year were largely eliminated due to attrition and by encouraging some managers to conduct more stringent annual reviews, according to three people with knowledge of the company's strategy.

An Apple spokesperson declined to comment.

Microsoft is the only technology company that did not report a reduction in its total number of employees. The company employed 221,000 people at the end of its fiscal 2023 year, equal to its post-pandemic peak.

Investors have rewarded Microsoft's stability. Last month, dethroned apple as the most valuable company in the world. Its market value is now more than $3 trillion.

Nico Grant, mike isaac and Karen Weiss contributed reports.


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