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Around the same time that Accenture announced an investment in Snorkel AI, a data labeling startup aimed at empowering its financial services clients, in August, the startup announced it would lay off about 13% of its staff.
It wasn’t alone.
when meta acquired a large stake in Scale AI in June, a deal touted as a show of confidence in the fast-growing data label company. This also led to the layoff of 14% of staff. Windsurf, a coding AI startup, offered all of its employees a buyout after its acquisition plan for OpenAI fell through. According to The Information, when Cognition acquired the company, it laid off 30 employees and made a takeover offer. HPAccording to Techcrunch, ‘s acquisition of AI pin company Humane resulted in pay increases of 30% to 70% for some staff, and immediate layoffs for others.
That trend is not slowing down either.
On Wednesday, Meta laid off 600 employees in its artificial intelligence division, with Alexander Wang, Meta’s chief AI officer (and founder of Scale AI), announcing the layoffs in a memo to staff.
When big technology companies double down on artificial intelligence development by acquiring or investing in nimble startups, employees at small and medium-sized businesses are often the first to feel the impact. As Wall Street scrutinizes investments, companies are turning to quickly eliminating redundant functions instead of looking to maintain startup culture and keep employees happy.
“In the past, we would have made more concessions on things like culture and continuity,” said JP Gowinder, vice president and principal analyst at Forrester. “That is not our position. Big tech companies aim to reduce staff to the minimum amount viable for a variety of reasons.”
Accenture, Meta, Cognition and HP did not respond to requests for comment.
Post-merger job losses are nothing new, but the way tech giants are handling these AI-driven acquisitions feels different. Part of the confusion stems from the fact that big tech companies are still recalibrating their workforces after years of pandemic-era hiring.
“As these large technology companies continue to pivot towards growth, and that growth is generally driven by AI, they will shed lower-growth and non-core assets, whether it’s for sale, downsizing or restructuring,” said Malinda Gentry, technology, media and telecommunications (TMT) industry leader at EY Parthenon Americas. “The result will be less labor needed or a more streamlined and efficient workforce.”
“The things that are happening and the changes in the workforce right now are being driven by rapid advances in AI,” Gentry said.
Startup exit and career end
The World Economic Forum estimates that AI could eliminate 80 to 85 million jobs and create 170 million new jobs worldwide over the next three years. The challenge for technology workers is finding a place in the interim as the industry moves toward a more AI-enabled workforce. While startups in this field offer flashy offers and opportunities for future career growth, they also create job instability as many of these companies have exit as their end goal.
Startups are less likely to be maintained as separate units and more likely to be streamlined into the existing operations of large technology companies. This is happening in a labor market where job seekers have long since lost the advantage of coronavirus-era “job hopping.”
“When you acquire a company, even though you’re firing people, you generally don’t want to lay off people unless you’re buying purely for intellectual property or customers,” Forrester’s Gowinder said. “But it’s an employer market at this point. What will people do?”
The pace of AI development is another factor driving workforce turnover. The shift to AI has not only eliminated the need for entry-level jobs, but also caused many tech companies to rethink their workforces and place more emphasis on senior positions.
“They are eliminating middle management and moving to a flatter organizational model,” Gowinder said. “So a lot of the layoffs are happening at the middle management level. It’s likely that technologies like collaboration technology and a very clear product development lifecycle are just eliminating the need for additional management layers.”
For employees, startups once dangled the carrot of growing with new technology and reaping the benefits of being acquired by a larger giant. But many employees now see it as a risk. Uncertainty could change the way AI startups hire. Contracts could begin to include stronger guarantees of capital and severance benefits in the event of a deal, as workers grow increasingly wary of being left out of deals.
“The implications of this ‘buying and liquidating staff’ are troubling in some ways,” Gowinder said. “If some of these startups want the talent they want to share in the spoils, it might make it a little harder to hire the people they want.”
Despite the confusion, experts stress that layoffs don’t tell the whole story. Every time a layoff is announced, there is also a hiring push in areas related to AI strategies. Big tech companies are still competing for scarce talent in machine learning, data science, and AI safety. There is no turning back from the future of an AI-powered technology workforce.
“The trend of workforce reductions will continue,” Gentry said. “But that is balanced with the ability to continue to grow and acquire talent, whether that talent is hired or acquired or partnered within the ecosystem.”
