Business Is Booming for Many Tech Giants. They’re Laying Workers Off Anyway.

When business is surging, companies often expand their workforces to handle demand. That’s not what’s happening lately at some of America’s biggest tech companies.

Oracle’s (ORCL) booming AI-driven backlog sent its stock to a record high this week—just weeks after reports the computing giant laid off hundreds of workers as part of an effort curb costs. Several other tech giants, including Microsoft (MSFT), Amazon (AMZN), and Google parent Alphabet (GOOGL), have shed jobs recently even as their revenues rose. (Oracle did not respond to a request for comment on the layoffs in time for publication.)

The tech sector has been one of the heaviest hit by layoffs so far this year, second only to government jobs, according to a report from Challenger, Gray, and Christmas. And many of the industry’s biggest companies are cutting from a large base: Data from online job board Indeed shows that listings for tech jobs peaked in 2022, outpacing the growth of available jobs in the economy at large, but that trend has reversed.

Leading tech firms are trimming their ranks as demand for their services grows. Their swelling spending on AI data centers and hardware from chipmakers like Nvidia (NVDA) is one contributing factor, according to Wall Street analysts.

AI expenditures are pushing tech leaders to cut costs elsewhere, D.A. Davidson analyst Gil Luria has previously told Investopedia, driving many to cut staff or slow hiring to relieve pressure on profit margins. Some, he said, also expect to need fewer workers because of the technology.

Amazon CEO Andy Jassy told employees in June that he expects AI will likely lead Amazon to eventually operate with a smaller total headcount. He encouraged them to become more familiar with AI tools, suggesting that those who do could be better-positioned “to have high impact and help us reinvent the company.”

Economists at Goldman Sachs have estimated that about 6% to 7% of U.S. jobs could be replaced by AI. However, they’re still optimistic about its effects on the job market, suggesting that losses could be “fleeting” and observing that job displacement due to labor-saving technological advances in the past have tended to fade after about two years.

“We remain skeptical that AI will lead to large employment reductions over the next decade,” they wrote. “Predictions that technology will reduce the need for human labor have a long history but a poor track record.”