The technology industry will usher in glory in 2024. NVIDIA's financial report exceeded market expectations, and the artificial intelligence craze is still in full swing. The tech-heavy Nasdaq is up more than 8% so far this year.
The U.S. economy also performed surprisingly well, with 353,000 new non-farm jobs added in January, much higher than economists' forecasts. The higher-than-expected inflation data may further make the Federal Reserve more cautious and not cut interest rates too soon.
However, for tech workers, the situation is completely different. Jeff Schulman, a professor at the University of Washington’s Foster School of Business, said:
"The layoffs in early 2024 mark a seismic shift in the tech industry. As the future of work changes, the future of technology changes, investor appetite for risk, growth and profitability changes. We will continue to see more Layoffs happen.”
The number of layoffs in the technology industry in 2024 has already exceeded the number of layoffs in 2023. About 42,324 tech employees have been laid off so far in 2024, according to Layoffs.fyi, which tracks layoffs in the tech industry. By 2024, the average number of layoffs will exceed 780 per day. Nearly 263,000 tech employees were laid off in 2023, with an average of about 720 layoffs per day that year.
There are several factors behind churn. Artificial intelligence is at the forefront. First, technology companies need to free up cash to invest in chips and servers to support and train AI models. At the beginning of the year, Alphabet (GOOGL.O) CEO Sundar Pichai said in a memo to employees:
"We have ambitious goals and will invest in big priorities this year. The reality is that in order to create the capacity for that investment, we have to make hard choices."
These technology companies are rearranging and organizing resources and plan to invest more funds in the development of AI technology.
At the beginning of this year, German software giant SAP announced a restructuring plan, which included layoffs of 8,000 employees. As soon as the news came out, the stock price rose by nearly 5%.
SAP's restructuring plan is mainly to promote the company's cloudification process. After Adobe, Microsoft and Oracle made cloud transformation, SAP is facing pressure to transform. The company predicts that the company's cloud computing revenue will reach 17 billion euros to 17.3 billion euros in 2024.
Behind this transformation is SAP's reflection on its business and organizational structure. The layoffs and restructuring plans are a direct result of this reflection. Analysts believe that
Although layoffs and restructuring will cause short-term pain, they are the only way forward for SAP's long-term development.
Secondly, there is the stock market effect. Companies that make layoffs are not penalized by investors or corporate profits. In fact, they've been rewarded with rising stock prices.
At the end of last year, Beyond Meat (BYND.O) announced that it would lay off 10% of its employees, or reduce annual costs by US$25 million, and its stock price rose by 6%. Spotify (SPOT.N) announced a global layoff of 17%, but its market value increased by US$2.6 billion; Twilio (TWLO.N) announced a layoff of 5%, and its market value increased by US$100 million.
Some companies see benefits in using AI technology to replace or supplement work typically done by humans. They are constantly determining which jobs can be replaced or reduced by AI, saving the company's operating costs to a certain extent.
In early January this year, Unity (U.N) announced that it would lay off about 1,800 people, accounting for about 25% of its existing employees. Its stock price rose 4% after the market closed.
IBM CEO said in a conference call on January 25 that the group will be committed to integrating generative AI technology and expects that related technologies can bring real revenue.
IBM also stated that the company will continue to adjust its corporate structure and will continue to lay off employees during the year. In addition, it will also hire more AI-related talents. IBM increased its planned spending reduction plan from $2 billion to $3 billion. As soon as the news came out, the stock price rose 8% after the market closed.
Article forwarded from: Golden Ten Data
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