Jose Luis Pelaez Inc | Digitalvision | Getty Images
At around the same time Accenture announced its investment in data labeling startup Snorkel AI to power its financial services clients in August, the startup announced it was laying off about 13% of its staff.
It wasn’t alone.
When Meta took a massive stake in Scale AI in June, the deal was billed as a sign of confidence in the fast-growing data-labeling company. It was also the catalyst that resulted in laying off 14% of its staff. Windsurf, a coding AI startup, offered buyouts to all of its employees after a failed OpenAI acquisition attempt. Once Cognition acquired the company, it laid off 30 staffers and was offering buyouts, according to The Information. HP‘s acquisition of AI pin company Humane led to some staffers receiving 30% to 70% increases in pay, according to Techcrunch – and layoffs immediately for others.
The trend isn’t slowing down, either.
On Wednesday, Meta laid off 600 employees within its artificial intelligence unit, with Meta’s Chief AI Officer (and Scale AI founder) Alexandr Wang announcing the layoffs in a memo to staff.
As big technology companies double down on artificial intelligence by acquiring or investing in nimble startups, the workforces of those smaller companies are often the first to feel the impact. With Wall Street scrutinizing investments, instead of an eye towards keeping the startup culture and keeping employees happy, it’s turning into quickly eliminating duplicate functions.
“In the past, there would have been more concessions made to culture, to continuity, to that sort of thing,” said JP Gowinder, Forrester vice president and principal analyst. “That’s just not where we are. Big Tech is all about cutting to the very minimum viable staff for a variety of reasons.”
Accenture, Meta, Cognition and HP did not respond to requests for comment.
While job losses after mergers are nothing new, the way tech giants are handling these AI-driven acquisitions feels different. Part of the disruption stems from the fact that large tech firms are still recalibrating their workforces after years of pandemic-era hiring.
“As these big tech companies continue to pivot towards growth and that growth is generally driven by AI, they are going to shed lower growth or non-core assets, whether they divest them, they wind them down, or they restructure them,” said Malinda Gentry, EY-Parthenon Americas leader for the Technology, Media and Telecommunications (TMT) industry. “That is going to result in needing less of that workforce or creating a more streamlined and efficient workforce.”
“What you’re seeing now in the workforce and the adjustments you’re seeing is driven by the rapid pace of AI,” Gentry said.
Startup exits and career endgames
The World Economic Forum estimates AI could eliminate 80 to 85 million jobs worldwide over the next three years, while creating as many as 170 million new ones. The challenge for tech workers is finding a place in the meantime while the industry shifts towards a more AI-enabled workforce. Startups in the space offer flashy offers and opportunities for future career growth, but with many of these companies eyeing exits as the final endgame, it also creates job volatility.
Startups are less likely to be preserved as stand-alone units and more likely to be streamlined into big tech’s existing operations. This is occurring within a labor market where job seekers have long since lost the Covid era “job hopping” edge.
“When you buy a company, if you get rid of people who are at the company – unless you bought it purely for the IP or for the customer – you don’t really want to get rid of the talent in general,” Forrester’s Gowinder said. “But it is such an employer’s market at the moment, what are people going to do?”
The pace of AI development is another driver of workforce churn. The move towards AI has made many tech companies bet not only that they won’t need entry level jobs, but also rethink the employee structure of their companies and placing a larger emphasis on senior roles.
“They’re moving toward a flatter organizational model, where they’re getting rid of middle management layers,” Gowinder said. “So a lot of the layoffs happen at that middle management layer. It’s a bet that technology, like collaboration technology and very clear product development life cycles, are just removing the need for extra layers of management.”
For employees, startups used to dangle the carrot of being able to grow with new technology and reap the benefits of being acquired by a larger giant. But now, many employees view it as a risk. The uncertainty could change how AI startups recruit. Contracts may begin to include stronger guarantees of equity or severance in the event of an acquisition, as workers grow wary of being left behind in a deal.
“The implication of this ‘buy and liquidate the staff’ is sort of troubling,” Gowinder said. “It may make it a little harder for some of these startups to hire the talent that they want, if the talent that they want is hoping to have a share in the spoils of this.”
Despite the turbulence, experts stress that layoffs don’t tell the whole story. For every downsizing announcement, there are also hiring pushes in areas tied to AI strategy. Big tech is still racing to secure scarce talent in machine learning, data science, and AI safety. There’s no turning back from an AI-powered tech workforce future.
“There’s going to continue to be a trend in workforce reduction,” Gentry said. “But that is balanced with the ability to continue to grow and acquire talent, whether that talent is hired, acquired, or partnered with in the ecosystem.”
