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Big Tech Companies Cut Costs and Lay Off Workers to Invest in AI Arms Race

Big tech companies like Meta, Alphabet, and Microsoft are ready to spend big on artificial intelligence (AI), despite cost-cutting measures that have led to job losses. The AI arms race is on, and these companies are funding it by saving money through firing employees. The word “AI” was mentioned more than 200 times on earnings calls by these companies, indicating their commitment to investing in expensive servers, infrastructure, and tools that incorporate the technology into their products and services.

These commitments come after announcements of spending cuts, including the elimination of over 40,000 jobs in recent months. For example, Alphabet CFO Ruth Porat stated that the company is committed to delivering long-term growth and creating capacity to invest in the most compelling growth areas by re-engineering their cost base. In other words, they are taking money away from things that they believe won’t make them a more valuable company and redirecting it towards AI, which they believe will.

Aside from AI, Alphabet is also spending billions of dollars in share buybacks, pleasing shareholders. However, the company has also eliminated 12,000 jobs, and Meta has done the same while also offering generous buybacks. They announced a $40 billion share repurchase plan in February, on top of the $50 billion authorized 16 months earlier.

Meta is focusing on infusing AI throughout its business, with much of its capital expenditures going to infrastructure for existing AI work like content recommendation algorithms on Facebook and Instagram, and building systems for generative AI technology. They are also capping their spending expectations at $90 billion, $11 billion less than the company’s estimate before they eliminated 21,000 employees.

While Microsoft did not have a fresh new buyback plan, CFO Amy Hood stated that they are committed to leading the AI platform wave and making the necessary investments to support it. In addition to laying off 10,000 workers this year, Microsoft also vowed to keep operating expenses in check.

It’s an interesting trade-off for technology companies that have long been known to stockpile talent to keep the smartest tech minds away from competitors. However, with cash tight, the message is clear: Big Tech believes it’s worth spending money on the machines, not so much on the people. Although robots may not be taking over job responsibilities, AI might still take jobs.

By: Mr. WWK


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