Technology company CEOs have cut thousands of positions over the past few months in anticipation of widespread productivity benefits from artificial intelligence.
While those moves may reduce costs in the short term, their broader business benefits remain to be seen. That raises a risk not only for the firms themselves but also for President Donald Trump’s administration, which has encouraged the widespread adoption of AI, promising it will benefit workers.
If companies use AI as a reason to cut headcount, Trump’s embrace of the new technology could backfire on the president at a time when the U.S. economy is on shaky ground and measures of consumer confidence are falling.
“AI will significantly improve GDP, but that doesn’t translate into jobs,” said Amr Awadallah, Vectara CEO. “It remains a big question mark for all of us. As we bring in these efficiencies, how do we make up for achieving this massive scale and growth but with less jobs?”
Salesforce CEO Marc Benioff announced this summer that AI is doing up to 50 percent of the company’s work, leading to a reduction of 4,000 jobs. Benioff said he “needs less heads,” adding that human workers and AI agents would work together. In July, Microsoft trimmed 4 percent of its workforce, doubling down on its investment in AI. IBM recently cut thousands of roles, mainly in human resources.
Last week, Meta told its Metaverse teams to use AI to work five times faster. However, several engineers at the company said the technology won’t immediately speed up workflows and, many times, it slows them down.
“We’re not going to become more productive overnight,” said one Meta software engineer who was granted anonymity to speak freely. “Often the AI makes mistakes and we have to go back and fix it. It ends up being more work.”
AI-related job cuts in the tech industry may also be showing up in economic data. Employment in the information sector, which includes tech-related occupations, fell by more than 160,000 jobs since the end of 2022, when the first version of ChatGPT was released, according to the Bureau of Labor Statistics. Employment in the overall economy is up more than 5 million over that span.
An ongoing survey of businesses by the Census Bureau suggests companies in the information sector — such as software publishers or social media companies — have been among the most enthusiastic adopters of AI. Almost 30 percent of information sector respondents said they used AI tools in the past two weeks, compared to 10 percent of all businesses.
Separate research by the Society for Human Resource Management shows only 6 percent of jobs are 50 percent or more automated — a sign that the scale of displacement is still limited.
As more industries begin adopting AI technologies, they could start seeing job cuts similar to those in the tech industry. That could spell danger for the Trump administration: A White House AI action plan, unveiled in July, promised good jobs and outlined initiatives to help American workers.
“The stock market could be doing great, but if unemployment is going up and AI is taking jobs — that’s not great for the average American,” said Darrell West, senior fellow at the Brookings Institution.
White House spokesman Kush Desai said the administration is “committed to ensuring that Americans have the skills, training, and opportunities to prosper in our next Golden Age,” adding that “two things can be accomplished at the same time: the United States can cement its dominance in cutting-edge technologies like AI while ushering in the job, wage, and economic growth that working-class Americans enjoyed during President Trump’s first term.”
Some executives at AI companies question whether firms should be cutting staff in response to its deployment.
“I think CEOs are using AI as an excuse to explain a wave of layoffs that are probably way over-determined by interest rate changes,” said Will Wilson, CEO of autonomous software company Antithesis. “AI has given them the perfect excuse.”
“Saying ‘we’re laying off all these people because AI has made us so much more massively productive’ makes executives look smart,” he added. “And the companies pushing this line tend to be those that benefit from AI investment mania.”
Cutting headcount now in expectation of future AI efficiencies could come back to haunt CEOs, said Justin Fineberg, CEO of Cassidy.ai, who has advised leaders at Microsoft and Amazon on implementing AI.
“If you take the 30% efficiency and you just use it to shrink the workforce to look good on an earnings report, which is what we see from CEOs, I think you’ve actually weakened your company long-term.” he said. “The CEOs who win will be the ones who redeploy talent – not outright reduce it.”
One area where AI is having a noticeable impact is small startups. Founders, who can’t compete with big tech, say they are often deploying the technology to do work they couldn’t have previously done for lack of staff.
“I think it’s going to be a huge leveler of the playing field,” said Jacob Bank, CEO of Relay.app, backed by Andreessen Horowitz and Khosla Ventures. “There will be tasks that people used to do that AI is getting way faster, better and cheaper at. Small businesses that haven’t had the resources to do those tasks will now be able to do them.”
