Tech giants like Dell are making massive bets on AI and automation, forcing them to trim down traditional operations and, unfortunately, leaving many employees jobless.
“Dell is streamlining its operations. We’re cutting down layers of management and reprioritizing our investment projects,” Bloomberg quoted an internal memo detailing Dell’s plan to lay off 10% of its workforce, which amounts to approximately 12,500 employees.
Business Insider reports that this decision comes as Dell rolls out its new AI strategy. Since October 2023, the company has been testing in-house AI tools and is now integrating them into product development, content management, sales tools, and customer service.
The “shadow of AI” is also looming over Intel, which announced plans to slash 15% of its workforce, an estimated 17,500 jobs, according to Reuters. Unlike Dell, Intel is cutting staff as it struggles to keep pace with competitors in the AI chip race, while the market for traditional data center chips is on a downward trend.
Intel is undergoing a major restructuring, sharpening its focus on AI-driven processors. In a significant announcement on August 1st, the company revealed plans to slash operating expenses by around $10 billion by 2025. “This move underscores Intel’s leadership’s willingness to take bold and decisive action to address their challenges,” Michael Schulman, the Chief Investment Officer at Running Point Capital, told Reuters.
Meanwhile, Cisco has initiated two major rounds of layoffs. The first, in February, saw 4,000 employees let go. The second wave, which is reportedly underway, may see an equal or even higher number of job cuts, as the company shifts its focus towards emerging sectors like AI and cybersecurity.
The tech layoff trend that began with the mass terminations in 2023 has continued into 2024. According to data from the employment platform Layoffs.fyi, approximately 60,000 tech workers have lost their jobs since the start of this year. Companies like Tesla, Snap, Amazon, Google, TikTok, and Microsoft are all striving to optimize their operational costs by streamlining their workforce.
**Reasons Behind Prolonged Tech Layoffs**
As reported by TechCrunch, the wave of layoffs in 2024 highlights the potential impact of artificial intelligence on human jobs. From startups to tech giants, companies are increasingly automating and reinventing their operations. As organizations channel resources into AI, they require significant financial investments, leading to the elimination of traditional roles that are no longer deemed necessary.
Some Dell employees shared with Business Insider that the layoffs have created a “challenging atmosphere,” but they acknowledge that AI is fundamentally changing the nature of work. From a purely business standpoint, what the leadership is doing makes sense,” said a Dell manager. “They’re doing everything possible to replace inefficient labor with AI to accelerate current sales solutions.”
Another employee observed that the increasing expenditure on AI servers necessitates workforce reductions to recoup costs on the business side.
Tech.co has pointed out that, in the long run, these changes help companies “stay afloat” and continue to grow. Those fortunate enough to avoid layoffs must accept the reality that they are not yet safe; this is not the final wave of industry shakeups in 2024.
The tech industry layoff trend began in late 2022 and swept through 2023. Notably, many companies continued to cut jobs even when revenue and profits were strong.
Pauline Roth, the founder of the consulting firm PCR (USA), wrote on LinkedIn that, in addition to the impact of AI, other factors such as the rapid expansion of workforces during the pandemic have led to a “surplus crisis.”
“Big tech companies are to blame for over-hiring. They recruited new hires for unnecessary positions just to meet vanity hiring metrics,” Keith Rabois, CEO of financial firm OpenStore, remarked at an Evercore banking event in Miami (USA) in early 2023. In particular, many Silicon Valley companies intentionally lured engineers and tech talent solely to prevent them from joining competitors.
However, post-pandemic, these companies are now dealing with an excess and shifting towards a “year of efficiency,” most notably seen in Meta’s 22% cut, affecting 21,000 employees. In February, CEO Mark Zuckerberg admitted that the initial layoffs were “painful and difficult,” but they would yield long-term benefits and efficiency.
Meta faced significant challenges in parting ways with talented engineers. Nevertheless, streamlining has genuinely improved our operations,” Zuckerberg stated.
Brent Thill, a tech analyst at investment bank Jefferies, warned in Fortune: “Companies will significantly reduce their workforce if they see others achieving more with a leaner staff. This is spreading throughout the tech industry.”
According to CNBC, despite the shocking news of layoffs, tech companies continue to hire for AI-related projects. The training organization CompTIA reported that there have been approximately 180,000 AI-related job postings in the U.S. so far this year. Last week, Zuckerberg stated that Meta had to reduce staff and control costs to “invest in a long-term and ambitious vision around AI.
Investors, on the other hand, view workforce adjustments as a positive signal. Jeff Shulman, a professor at the Foster School of Business at the University of Washington, pointed out that layoffs occur when small companies run out of cash, while large corporations see streamlining as a way to enhance their operations.
“The stock market often responds positively after each round of layoffs, so companies have little reason to stop. They want to please investors,” Shulman told NPR. “This wave is, in many ways, a case of companies mimicking one another.”
