Hi, it's Michal Lev-Ram, filling in for Jeremy this week.
Living in Silicon Valley, it’s hard not to feel like layoffs are all around me.
My next-door neighbor, a former Twitter employee, lost her job late last year. A close friend who worked at Google also got laid off, one of 12,000 in Alphabet’s recent round of pink slips. Indeed, the headlines keep coming: 11,000 jobs cut at Meta; 8,000 at Salesforce; 18,000 at Amazon.
Most tech company CEOs have blamed the layoffs on their pandemic-era hiring sprees, saying they take “full responsibility” for the decisions that led to them. (This begs the question: Is it not obvious that the responsibility for both hiring and firing decisions always lies with the CEO?) Not surprisingly, most leaders are also saying they are cutting with care—not across the board but in areas they have deemed to be too “fat” or non-essential to their company’s growth strategy. (Sadly, early data shows that one of the areas that's being disproportionately impacted by layoffs are diversity, equity, and inclusion roles.)
But just as telling as where cuts are being made is where CEOs don’t appear to be making cuts.
“It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas,” Microsoft CEO Satya Nadella wrote in a memo to employees on Jan. 18, in which he announced that the company would be shedding 10,000 jobs. “We will continue to invest in strategic areas for our future, meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas.”
What are those strategic areas that represent long-term competitiveness? I can think of one: artificial intelligence. Indeed, early on in his memo, Nadella says that “The next major wave of computing is being born with advances in A.I.”
But that shift in strategy is not only happening at Microsoft. Just two days after Nadella’s layoffs memo was pushed to employees and published online, Alphabet CEO Sundar Pichai sent a similar letter to Googlers. (Yes, the two companies seem to compete even when it comes to the timing of job cuts.)
“I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in A.I.,” Pichai told employees. “To fully capture it, we’ll need to make tough choices.”
Those tough decisions included laying off 6% of Alphabet’s workforce, and shuttering several experimental projects. A.I. has not been completely spared from the belt-tightening—Alphabet's DeepMind A.I. subsidiary recently shut down an outpost in Edmonton, Canada. And Insider reported that Microsoft's Cloud+AI group, led by EVP Scott Guthrie, was impacted by the recent layoffs (though how severely, remains unclear).
Compared to other groups getting "right-sized" right now, however, A.I. is far less expendable. Few Big Tech CEOs would refer to their A.I. efforts as experimental—existential is probably a more apt word to use here, given the tense and high-stakes race brewing between Google's late-to-the-game Bard chatbot and Microsoft’s bet on ChatGPT, the OpenAI-developed tool that’s reportedly growing faster than TikTok.
Speaking of ChatGPT, there’s no bigger signal of how priorities are shifting than the timing of Microsoft’s multi-year, multi-billion-dollar investment in its maker, OpenAI, which was officially announced just days after the company disclosed its pending job cuts.
Make no mistake: Despite the excitement over what ChatGPT and its competitors might someday enable—including, perhaps, new types of jobs—the current wave of layoffs is tough on workers, on their families, and even on the morale of employees who weren’t directly impacted. More than 100,000 people have lost their tech company jobs since the start of this year alone, according to online tracker Layoffs.fyi. Those job cuts took place across 344 different companies, ranging from the largest tech titans to small-scale startups. One company that’s not on the massive (and massively depressing) database compiled by Layoffs.fyi? No surprise here: OpenAI.
With that, here’s the rest of this week’s A.I. news.
Michal Lev-Ram
michal.levram@fortune.com
