Many tech companies like Dell are betting big on AI and automation, forcing them to cut traditional divisions, putting many people out of work.
“Dell is streamlining its organization. We are reducing management layers and re-prioritizing investment projects,” Bloomberg quoted an internal notice related to Dell’s plan to lay off 10% of its workforce, equivalent to 12,500 people.
According to Business Insider, the decision comes as Dell rolls out a new AI strategy. The company has been testing internal artificial intelligence tools since October 2023 and is applying them to product development, content management, sales tools, and customer service.
The “AI specter” also appeared in Intel’s announcement to cut 15% of its staff, equivalent to 17,500 people, according to Reuters estimates. Unlike Dell, Intel has to reduce its staff because it is falling behind its competitors in the AI chip race, while the market for chips for traditional data centers is on the decline.
Intel is restructuring to focus on developing AI processors. In an announcement on August 1, the company plans to reduce spending and operating expenses by about $10 billion between now and 2025. “The plan shows that Intel’s management is willing to take strong and drastic measures to solve the problem,” Michael Schulman, chief investment officer at Running Point Capital, told Reuters.
Meanwhile, Cisco has made two major cuts. The first came in February, when 4,000 employees were laid off. The second is believed to be underway, with the same or higher number, as the company shifts its focus to new areas like AI and cybersecurity.
After the big layoffs in 2023, the trend is set to continue in 2024. Data from the job platform Layoffs.fyi shows that about 60,000 tech workers have lost their jobs so far this year. Companies like Tesla, Snap, Amazon, Google, TikTok, and Microsoft are all looking to optimize operating costs by streamlining their operations.
Why tech layoffs are lingering
According to Techcrunch, the wave of layoffs in 2024 shows the potential impact of artificial intelligence on human work. From startups to technology corporations, everyone is automating and innovating the way they operate. When organizations focus on AI, they need to raise large amounts of money, leading to the elimination of traditional, irrelevant departments.
Several Dell employees told Business Insider that the layoffs were “hard to stomach,” but they understood that AI was changing the nature of work. “From a purely business perspective, what leadership is doing makes sense,” one Dell executive said. “They’re doing everything they can to eliminate inefficient labor and replace it with AI to accelerate existing sales solutions.”
Another employee assessed that the amount of money spent on AI servers is increasing, so reducing staff is a way to recover costs on the business side.
Meanwhile, Tech.co believes that in the long run, these changes will help companies “survive” and continue to grow. Those who are lucky enough not to be laid off must accept the fact that they are not yet safe, and this will not be the last purge of the technology industry in 2024.
Previously, from the end of 2022, the wave of technology layoffs had begun and “swept” throughout 2023. Notably, many companies still laid off employees even when revenue and profits were positive.
Pauline Roth, founder of the PCR consulting firm (USA), wrote on LinkedIn that besides the impact of AI, there are a number of other reasons such as the rapid expansion of human resources during the pandemic period, creating a “crisis of surplus”.
“Big tech companies are responsible for hiring too much. They hire new people, fill unnecessary positions just to meet the vanity metrics of hiring,” Keith Rabois, CEO of financial company OpenStore, said at an Evercore banking event in Miami (USA) in early 2023. In particular, many companies in Silicon Valley intentionally attract engineers and technology talent just with the purpose of preventing them from moving to competitors.
But in the wake of the pandemic, they faced redundancies and pivoted to a “year of efficiency,” with Meta cutting 22%, or 21,000 people. In February, CEO Mark Zuckerberg admitted that the layoffs were “painful and difficult” in the early stages, but had long-term benefits and efficiencies.
“Meta had a hard time letting go of talented engineers. But being lean really helped us operate better,” Zuckerberg said.
Brent Thill, a technology analyst at investment bank Jefferies, warned Fortune at the time : “Companies will cut massive amounts of human resources if they see other businesses doing more with fewer employees. This is spreading throughout the technology industry. “
Despite the shocking news of layoffs, tech companies are still hiring for AI projects, according to CNBC. Training organization CompTIA has reported that there have been about 180,000 AI-related job postings in the US since the beginning of the year. Last week, Zuckerberg said Meta had to reduce staff and control costs so it could “invest in the ambitious, long-term vision around AI.”
Meanwhile, investors see the staffing adjustments as a positive sign. Layoffs happen when small companies run out of cash, while large companies find that streamlining makes them more efficient, according to Jeff Shulman, a professor at the University of Washington’s Foster School of Business.
“The stock market does well after every round of hiring, so companies have no reason to stop. They want to please investors,” Shulman told NPR. “This wave is even copycat.”
