The global IT job market is experiencing renewed upheaval as 2024 witnesses a fresh wave of mass layoffs. From January to July this year, 410 companies and startups within the tech sector have laid off a staggering 133,000 employees, according to data from Layoffs.
This marks a significant continuation of the trend from 2023, during which 264,000 tech workers lost their jobs. Industry analysts attribute this resurgence to lingering challenges from last year, forcing tech giants to overhaul their business models, streamline operations, and intensify their focus on artificial intelligence (AI).
The Extent of Layoffs and Investor Influence
With the scale of these layoffs growing, many are questioning which companies might be next and what factors are driving these decisions.
Although the tech sector saw significant job cuts in 2023, experts did not predict that 2024 would follow a similar pattern. While the labour market in IT has shown some signs of recovery post-pandemic and recession, there are emerging signals of instability. A report by the Information Technology Industry Association in the U.S., based on Bureau of Labour Statistics data, revealed that unemployment in the IT sector reached 3.7% in June 2024, the highest level since August 2020, when it stood at 4.6%.
Moreover, data from the analytical platform DevQuarterly shows that the number of IT job vacancies in the U.S. has plummeted, decreasing from 60,800 in May 2022 to just 18,000 by January 2024—a reduction of more than threefold in less than two years.
Companies Impacted by Job Cuts
In the first quarter of 2024 alone, tech companies announced layoffs impacting over 100,000 workers. Notable companies such as Alphabet, Meta, Amazon, TikTok, Tesla, and Microsoft were among the first to announce job cuts. The Guardian reported that Google has already let go of more than 1,000 employees this year across its hardware, advertising sales, and search divisions. This follows the 12,000 jobs the company cut in 2023.
The restructuring at Google has particularly affected teams working on Google Assistant and the Devices and Services PA division, which oversees the Pixel, Nest, and Fitbit product lines. Google CEO Sundar Pichai explained in a blog post that these layoffs were part of the company’s strategy to shift investments towards new priority areas, which necessitated “difficult but necessary decisions.”
Amazon, too, has announced the dismissal of several hundred employees, including staff at Prime Video and the Metro-Goldwyn-Mayer (MGM) studio, which Amazon acquired in 2022 for $8.5 billion. Amazon’s leadership cited a strategic pivot away from entertainment investments towards logistics and AI-focused initiatives as the reason behind these cuts.
In August, Intel followed suit, announcing that it would cut 15,000 jobs, equivalent to 15% of its workforce. This decision was driven by rising financial losses, which surged from $437 million in 2023 to $1.6 billion in the second quarter of 2024. Intel CEO Pat Gelsinger stated that these layoffs are essential to saving $10 billion by 2025. The company plans to prioritise critical projects, with a particular emphasis on AI, acknowledging that it has yet to fully leverage this growing trend.
Factors Behind the Layoffs
Several key factors that prompted the mass layoffs in the tech industry in 2023 continue to influence staffing decisions this year. Chief among them is the integration of AI into business operations. Research from the firm Gray & Christmas found that AI was directly responsible for 800 layoffs in April 2024, the highest monthly figure since May 2023.
AI is proving to be a double-edged sword for the IT industry. On one hand, it is driving rapid innovation and growth; on the other, it is also a significant contributor to the latest wave of layoffs. This juxtaposition highlights the transitional phase the industry is undergoing, as tech giants and smaller firms alike adjust their strategies to incorporate AI while scaling back on other areas.
At the close of 2023, global investors identified AI as the most promising yet volatile area for investment in 2024. Drew Glover, a general partner at Fiat Ventures, even labelled AI as the “biggest bubble of 2024.”
AI startups are attracting substantial investment, often based more on hype than on proven business models. Many tech teams lack the experience necessary to successfully bring AI-driven products to market, leading to the closure of projects that fail to generate revenue or demonstrate viability.
Despite these challenges, IT companies are increasingly orienting their development strategies around AI, which is rapidly infiltrating all aspects of business—from operations and production to marketing. As a result, hiring strategies are also evolving.
IBM CEO Arvind Krishna has indicated that his company will pause hiring until AI is fully integrated into its operations. Similarly, Mark Zuckerberg of Meta has stated that job cuts were necessary to free up resources for long-term AI initiatives.
AI’s growing influence in the tech world is prompting companies to prioritise this technology over maintaining large workforces, as they seek to cut costs and navigate an uncertain economic and geopolitical landscape.
A report by Goldman Sachs suggests that AI could lead to the loss of up to 300 million jobs globally. While AI is likely to create new job opportunities in the future, it currently poses a threat to many workers in the tech industry.
Another factor driving layoffs is the high cost of borrowing due to rising interest rates. Nick Housling, managing director at Romy Group LLC, explains that as interest rates climb, loans become more expensive, and stock values decline. With central bank rates now at their highest levels in two decades, another wave of tech sector layoffs was almost inevitable.
Housling notes that innovative startups, which have yet to prove their business models or achieve profitability, are struggling to secure funding, often accepting unfavourable terms. Larger corporations are also under pressure from investors to reduce costs in response to slowing revenue growth.
Despite the ongoing layoffs, industry experts do not believe that the global IT sector is in a state of decline in 2024. As WIRED reports, these job cuts are more indicative of a shift in company priorities as they seek to enhance profitability.
In the end, while major companies like Google and Microsoft are reducing their workforces, many IT professionals have successfully transitioned to other sectors, including government, manufacturing, and even agriculture. Some laid-off workers have used this period as an opportunity to launch their own startups, turning a challenging situation into a chance for new beginnings.
Read also:
Cisco to Implement Second Round of Layoffs Amidst Strategic Shift to AI and Cybersecurity
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