Silicon Valley has already laid off 20,000 people at the beginning of the year. Are tech giants "laying off" to subsidize "AI"?

Silicon Valley giants have laid off more than 20,000 people by 2024, all because of AI?

On January 26th, media reports cited insider sources saying that Salesforce, the world's largest customer relationship management (CRM) software provider, announced that it would lay off about 700 people, accounting for approximately 1% of its total workforce. The insiders said:

Salesforce is still hiring, and this round of layoffs may just be a routine talent structure adjustment, rather than a strategic shift, to help the company better concentrate its capital expenditure in the growth areas.

Prior to this, Microsoft announced plans to lay off 1,900 people in one of its divisions, accounting for 8% of the division's total workforce of 22,000. The impact on the Activision Blizzard team, which has been under Microsoft for less than four months, is the most severe, with Activision Blizzard President Mike Ybarra and Chief Design Officer Allen Adham also leaving the company.

Microsoft's Head of Gaming, Phil Spencer, called this round of layoffs a "painful decision." Regarding the specific reasons for the layoffs, Spencer mentioned that the leadership of Microsoft and Activision Blizzard " identified priorities and clarified overlapping areas to ensure our alignment on the best growth opportunities."

Media analysis points out that Microsoft announced a plan to lay off 10,000 people a year ago, and this round of layoffs is also aimed at saving labor costs to better develop key strategic directions such as AI.

Since 2024, news of layoffs in Silicon Valley giants has been constant, with Google, Apple, and Amazon all issuing layoff notices. Riding the wave of AI, major companies have begun to adjust their talent structures, aggressively recruiting talent in the AI field while cutting expenses in non-strategic areas.

According to the latest data from the layoff tracking website layoffs.fyi, more than 80 tech companies have announced layoff plans in 2024, affecting a total of over 20,000 employees. The website's data shows that in 2022 and 2023, global tech companies laid off 160,000 and 260,000 people, respectively.

Dan Ives, Managing Director of Wedbush Securities, pointed out in an interview with the media that as this AI arms race continues, large tech companies will continue to lay off employees in certain areas, while the hiring frenzy in the field of artificial intelligence will be unprecedented.

AI Triggers Wave of Layoffs in Silicon Valley in 2024

At the beginning of 2024, news of layoffs from major companies in Silicon Valley continues to emerge. On January 11th, Google laid off nearly a thousand employees, affecting departments including the core engineering team, the virtual assistant Google Assistant team, and the hardware team responsible for producing Pixel phones, Fitbit watches, and Nest thermostats.

On January 17th, Google CEO Sundar Pichai sent a memo to employees, stating that Google has ambitious goals and will invest in certain priorities this year. As the company continues to shift its investments towards artificial intelligence, layoffs will continue this year. Pichai pointed out, "The reality is that we must make difficult choices in order to create the capabilities to invest in AI."

Just a day before this company-wide memo was released, 100 positions at Google's video platform, YouTube, were also eliminated.

E-commerce giant Amazon also announced in January that it would be cutting hundreds of positions at its Prime Video and MGM studios. Over 500 employees at Twitch, the live streaming platform acquired by Amazon years ago, were also laid off.

Mike Hopkins, head of Amazon Prime and Studios, stated, "The company has identified opportunities to reduce or stop investments in certain areas, while seeking to increase spending on some of the most impactful content and product projects."

In addition to these major companies, some popular startups in Silicon Valley have also begun layoffs: social platform Discord announced a 17% reduction in workforce, affecting 170 employees. Companies like Audible, Duolingo, and Unity have also undergone rounds of layoffs...

Recruiting AI talent with one hand, layoffs becoming the norm with the other

Media analysis points out that competition between tech giants is becoming increasingly fierce, and the transformation to AI is also a costly bet. The increased costs will be offset by weakening or even cutting back on non-AI-related departments, resulting in layoffs of employees unrelated to AI.

Alex Kantrowitz, founder of Big Technology, stated in a media interview, "Companies are no longer living in a low-interest-rate environment. They do need to find ways to cut costs in order to invest in generative AI, and the costs of training and deploying AI are extremely expensive." Meanwhile, as tech giants are laying off employees, they are also posting more job openings related to AI. For example, Google Cloud and Google Search departments have both posted job openings for positions such as Generative AI Solution Architect and GPU Acceleration Engineering Director.

At the same time, according to media reports, in order to retain AI talent, Google plans to further increase incentives. In the future, they may establish a special "stock incentive pool" to reward the top AI researchers in the company, with some rewards reportedly reaching millions of dollars.

Silicon Valley engineers have pointed out in previous interviews with the media that "people who understand both AI and products are now highly sought after by big companies." The situation where tech companies are laying off employees while hiring at the same time has become a new norm since last year. This is a necessary stage in the transformation of business structure and talent demand structure.