AI as a pretext for tens of thousands of tech layoffs

There is currently no evidence that AI is actually replacing jobs on a large scale.

Oracle is reportedly planning to lay off thousands of employees, adding to a growing list of tech companies cutting staff while continuing to spend hundreds of billions of dollars on AI data centers.

Layoffs across Big Tech as AI spending continues

Recent job cuts at major technology firms include:

• Microsoft cut 15,000 people last year.
• Amazon laid off 16,000 employees in January.
• Atlassian cut 10% of its workforce as part of a pivot toward AI.
• Block cut 40% of its workforce, arguing that AI could handle much of the basic programming work.
• Meta laid off 700 employees while boosting stock compensation for a small group of senior leaders.

Big Tech leaders have long warned that AI would lead to job losses. However, the article notes that the layoffs may not stem directly from AI replacing humans, but instead reflect business decisions similar to the pre-AI era—when companies overspend, they eventually cut costs.

Why layoffs are being tied to AI

Executives have linked layoffs to AI in broad terms, while the article points to other pressures that have intensified since the pandemic, including high interest rates, inflation, and expectations around AI that remain “hazy.”

Oracle: unclear scope, cash pressure, and AI infrastructure plans

It remains unclear how many of Oracle’s roughly 162,000 employees will be affected. CNBC, citing two sources, put the number in the thousands. Separately, TD Cowen analysts forecast Oracle could cut as many as 30,000 jobs along with other measures to improve finances. Oracle declined to comment.

While the details are not clear, the article says Oracle is in “dire need of cash” and is trying to reposition itself as a major AI player alongside Microsoft and Amazon.

The strategy depends on a costly objective: building data centers to provide AI services to customers such as OpenAI. Oracle pledged last month to raise up to $50 billion this year through a mix of debt and equity.

Market reaction and rising credit concerns

During the early stage of the AI boom, investors responded positively to Oracle’s ambitions, pushing its stock up 50% in 2023 and 60% in 2024.

That sentiment shifted as Oracle took on billions of dollars of debt and data-center construction costs rose. Oracle shares have fallen 54% from their September peak, and some banks have pulled back financing for Oracle-related data-center projects.

According to Bloomberg, a key credit risk index for Oracle hit a record high last week, reflecting investor concerns about the company’s debt burden.

Broader context: debt-funded AI bets and limited proof

The article argues that Oracle is not the only company pursuing debt-funded AI ambitions, but its free cash flow is described as much lower than peers. It also notes that Oracle is betting its AI future on a single large customer, OpenAI, which has never posted a profit and is undergoing strategic restructuring to widen the gap with competitor Anthropic.

While the “bloodbath” of office jobs that tech leaders warned about is often framed as an inevitable result of AI replacing human labor, the article concludes that there is still no evidence that AI is replacing workers on a large scale. Instead, it says the biggest disruption so far has come from corporate leaders tying their companies’ futures to a technology that has yet to prove the lofty expectations it has set.

Source: Fortune