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Key takeaways
- Combined, Amazon and Microsoft are laying off a total of 28,000 employees
- The wave of tech layoffs is continuing into 2023
- An uncertain economic climate is one reason behind the string of layoffs
The current economic climate is highly unsettled, and recession fears have plagued our economy for months. According to the National Bureau of Economic Research, we haven’t hit an official recession yet. However, mass layoffs in the tech industry have shown us that the economic picture is anything but rosy.
Let’s dive into the details of the latest wave of job cuts and explore why we might be seeing these historic layoffs.
What’s happening?
It’s not a secret that the tech industry has been struggling for months. In 2022, hundreds of companies across the tech industry will institute layoffs. Meta’s layoffs were among the eye-popping headlines, with over 11,000 employees out of a job.
It looks like the tech layoffs will continue with lasting impacts in 2023. Earlier this month, Amazon and Microsoft announced layoffs totaling around 28,000 employees combined.
Here’s a breakdown of the layoffs at both companies—plus what it all means for tech investors and how Q.ai can help.
Microsoft layoffs
On January 18, Microsoft’s CEO, Satya Nadella, announced significant layoffs at the company. In a statement, Nadella said, “today, we are making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of FY23 Q3. This represents less than 5 percent of our total employee base, with some notifications happening today.”
Nadella continues, “It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas. We know this is a challenging time for each person affected. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible.”
Interestingly, Microsoft mentions hiring employees in certain areas. Earlier this month, Nadella warned of challenging times ahead in the next two years for the tech sector in an interview with CNBC-TV18.
Amazon layoffs
While Microsoft is laying off around 10,000 people, Amazon is laying off an astonishing total of 18,000 people. This combined number includes layoffs in November 2022. The cuts represent approximately 6% of Amazon’s workforce.
According to a memo from Andy Jassy to Amazon employees, many teams are impacted. However, most of the eliminated roles are connected to the Amazon Stores and PXT divisions.
Within the memo, Jassy says, “Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so. These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be inventive, resourceful and scrappy at this time when we’re not hiring expansively and eliminating some roles. Companies that last a long time go through different phases. They’re not in heavy people expansion mode every year.”
Tech layoffs: reasons
It’s estimated that approximately 174 tech companies have already laid off over 56,000 employees in 2023. Given that it’s still only January, these cuts are remarkable. However, the latest wave of layoffs is a continuation of the series of layoffs that happened throughout 2022.
These layoffs are evidence of a struggling tech industry. But why is the tech sector having a tough time? Here’s a look at some of the reasons behind the history-making layoffs.
The need to pivot
The tech industry is constantly shifting. That’s the nature of companies working on ever-evolving technology. As the company grows towards new technologies, some are left behind.
Even Microsoft’s CEO pointed out that the company will continue hiring in key areas. In other words, the company is channeling its resources to new technology that might be beneficial in the long run.
With technological advances, some of the layoffs at major tech companies are an unavoidable part of progress.
Shaky economic times
In the last year, the economy has been anything but stable. As households and companies brace for a recession, it’s an appropriate time for some belt-tightening. While households can trim their expenses by cutting back on splurges, companies often cut back by instituting layoffs.
Layoffs aren’t pleasant for anyone, but the action might be what the company needs to stay afloat. With fewer jobs to support, companies can continue moving forward regardless of economic storm clouds.
Are layoffs bad for investors?
Although people’s gut reaction to headlines about layoffs is negative, layoffs aren’t necessarily a sign of doom for the tech industry. Instead, the industry is likely to continue shifting as it pushes the envelope of technology forward.
While individual companies might become winners or losers, technology will likely continue to be a worthwhile investment for many portfolios. The main challenge is to determine which companies will come out on top. Of course, it’s impossible to predict the future, but carefully monitoring the market might indicate the right choices for your portfolio.
If you aren’t up for the challenge of regularly monitoring all things tech, that’s okay. You can harness the power of artificial intelligence (AI) to monitor the markets for you. Using Q.ai, you can add Investment Kits to your portfolio.
Once you choose an Investment Kit, Q.ai will monitor the changing market. If things change in the tech industry, Q.ai will make the appropriate changes to your portfolio to keep it aligned with your goals and risk tolerance. If you are interested in tech, consider adding the Emerging Tech Kit to your portfolio.
The bottom line
The latest layoffs from Microsoft and Amazon will leave thousands of tech workers without jobs. Although the numbers are eye-popping, the layoffs do not mean disaster for the tech sector. Instead, it signals economic uncertainty and a need to redirect company resources towards new technology ventures.
Download Q.ai today for access to AI-powered investment strategies.
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