AI Job Destruction Accelerates

Earnings calls have become increasingly outlets for CEOs to say they need fewer people because of AI. Or, they may need fewer people, but are not sure. Or, their AI will make the people they have more productive. The number of AI-driven layoffs is certainly rising. Yesterday, Challenger Gray announced that layoffs in April were heavily driven by AI’s efficiency gains, resulting in fewer workers.

Yesterday, there was another AI-based job cut announcement. Internet infrastructure and cybersecurity company Cloudflare (NYSE: NET | NET Price Prediction) said it would cut about 20% of its staff, representing over 1,000 people. In its quarterly press release, it disclosed, “We currently estimate that we will incur charges of $140.0 to $150.0 million in connection with the plan, consisting primarily of cash expenditures for notice period, severance payments, employee benefits, and related.”

The other part of the press release shows revenue was up 34% to $649 million. The company reported a net loss of $23 million, compared with a loss of $38 million in the same period a year ago. It gave Wall St. what it considered less-than-stellar guidance. After hours, the stock plunged 17%. Barron’s said that Cloudflare’s results were simply not enough to satisfy wild expectations about its future.

Amid announcements of tech industry layoffs, the one that has stood out the most is Block’s (NASDAQ: SQ) 40% layoff of its total workforce. It is a staggering number of people and shows the faith one large tech company has in an AI-based future.

There is disagreement about why these layoffs have occurred. The first theory is that companies have found AI extremely beneficial for productivity. The other is that companies have gotten out over their skis, but want to satisfy Wall St’s hunger for a world of tremendous worker efficiency before that efficiency is actually in place.

Which theory about AI layoffs is correct may be years away. What is not years away is the large number of tech workers looking for new jobs in a market where these jobs have already been taken by AI.