Tech Giants Cut Jobs as AI Costs Rise

Meta's May layoff of 8,000 workers felt like an omen for the whole tech world. The parent company of Facebook, Instagram and WhatsApp had already seen its biggest bets fail, from the metaverse to massive court losses. Meanwhile, Google extended its voluntary buyout program to five countries, and Canva slashed its workforce by 22 percent, affecting 1,271 people.

The main reason for these cuts is artificial intelligence. Companies have poured billions into the technology, and Goldman Sachs estimates that $3.2 trillion in AI spending doesn't even show up on balance sheets. With returns failing to justify the massive investment, firms are slashing labor costs and relying on AI to make up for lost productivity.

Even though the US isn't officially in a recession yet, there are growing fears that mass layoffs could spread to retailers and financial firms. Analysts warn that if job losses extend beyond tech, another 1.6 million people could be laid off, pushing unemployment close to recession levels. Entry-level hiring has dropped by a third in the most AI-exposed jobs since 2021.

Job instability is getting worse, especially for younger workers. Household wages aren't keeping up with rising costs, and many people have been unemployed for over six months. The overall job market is fragile, and the potential for a broader downturn is real if the AI market corrects itself and major companies cut spending.