AI is costing jobs, but not always the way you think

Oracle is giving investors another peek under the hood of the AI boom with its quarterly earnings report today. The company’s stock has surged about 60% over the last year thanks to high demand for its AI cloud services.

Despite soaring revenues, Oracle has been cutting jobs — hundreds in the U.S. over just the last month. And so have other leaders of the AI boom — Microsoft, Google and Meta have all shed thousands of jobs this year. And while “AI productivity gains” are sometimes touted as reducing the need for staff, there’s also the giant sums these companies are sinking into their buildout of AI.

The companies riding the highest on the AI wave are also making some of the deepest cuts. And no — it’s not just because of AI coding.

“I think what you're seeing with these layoffs is really more of a strategic realignment based on resource constraints,” said analyst Eric Seufert at Mobile Dev Memo.

He said even the richest companies in the world have to prioritize.

“The more attractive the opportunity, the sort of like more aggressively you want to pursue it,” Seufert said.

Even if it means sacrificing other parts of the business. Oracle has scaled back its health division, Microsoft cut gaming and Meta trimmed the Metaverse.

It’s normal for a business to pivot to new opportunities, but the cost to play the AI game is on a whole new level.

“There's physical data centers, there's real estate, there's energy,” said Daniel Newman at Futurum Group.

Immediately before the AI frenzy, Google and Microsoft spent $20 to $30 billion a year on infrastructure. Now it’s two to three times that.

Then there’s the war for AI talent.

“So instead of hiring, you know, 1,000 workers at $100,000 a year, right now you have, one employee taking $100-200 million,” said Newman.

Demand for AI is strong, but there’s no guarantee this gamble will pay off according to Sarah Myers West at the AI Now Institute.

“There's just so much spend on this one really big bet, and they're shortchanging other areas, including, you know, their own human resourcing,” West said.

Still — companies keep upping the ante — last week Meta said it’s planning to spend about $600 billion on AI infrastructure in the next few years.