Making room for AI investment? US tech giants lay off nearly 140,000 employees this year

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While American tech giants are spending heavily on artificial intelligence (AI) infrastructure, they are also launching a new wave of large-scale business restructuring, with nearly 140,000 layoffs so far this year.

According to an analysis by the British Financial Times of company filings and data from executive outplacement firm Challenger, Gray and Christmas, since early 2026, the number of layoffs in the tech industry has accounted for more than one-third of all announced layoffs in the United States. Among them, Amazon, Oracle, Meta, and Microsoft have collectively laid off nearly 50,000 employees, about 6% of their total workforce.

This trend of streamlining staff stands in sharp contrast to the industry's aggressive AI expansion. This year, Amazon, Alphabet, Meta, and Microsoft are expected to spend as much as $725 billion in capital expenditures on infrastructure such as data centers. These massive expenditures have begun to put pressure on some companies’ balance sheets, and the market is increasingly scrutinizing the cash flow and investment returns of tech companies' AI projects.

Capital Restructuring and Ratings Pressure

Tech giants are cutting their workforce to free up funds for AI infrastructure construction.

RBC analyst Rishi Jaluria pointed out that tech companies are using layoffs to offset earlier over-hiring and to free up capital for AI investments. Take Oracle as an example: the company plans to invest $70 billion in similar data center facilities to serve clients like OpenAI. However, the high spending has raised concerns in the credit market. After layoffs in March, Oracle’s workforce at the end of its 2026 fiscal year was down by 21,000 compared to the previous year. This month, S&P downgraded its credit rating to just one notch above junk status, citing weak cash flow and uncertainty about AI returns.

Meanwhile, giants are making bold moves to restructure previously bet-on growth businesses. Microsoft cut 4,800 positions this month, mainly in the Xbox gaming division, which is a restructuring after its $75 billion acquisition of Activision Blizzard three years ago. Rishi Jaluria commented that tech companies are “moving from one bet to the next.”

'AI Excuse' and Over-Hiring Controversy

As restructuring advances, some tech executives attribute layoffs to productivity gains brought by AI.

According to data from Challenger, Gray and Christmas, since May 2023, as many as 170,000 corporate jobs have been lost related to AI technology. In May of this year, Block CEO Jack Dorsey laid off nearly half of the company’s staff (which previously numbered 10,000), and stated in a memo that AI is changing workforce needs.

However, academia holds doubts about this logic. Enrico Moretti, Professor of Economics at UC Berkeley, believes that AI-related layoffs are more an excuse for management to correct past decision errors. He points out that tech executives prefer to claim AI has brought efficiency improvements rather than admit to over-hiring during the pandemic, using it as an “easy way out.”

Market Performance and Industry Differentiation

Investors have not positively priced layoffs attributed to AI. According to Financial Times analysis, in the 30 trading days after layoffs are announced, tech companies attributing layoffs to AI see their share prices lag the Nasdaq by nearly 10%. In contrast, those blaming other reasons see a lag of only about 4%. To avoid negative reactions, several large tech companies, including Amazon and Microsoft, have stated clearly that the adoption of AI technology is not the decisive factor behind their layoffs.

While traditional tech giants continue to shrink their non-core businesses, the job market in native AI fields shows a vastly different picture. AI-focused startups such as Anthropic and OpenAI are rapidly expanding their workforce, somewhat offsetting the impact of widespread tech industry layoffs. As Enrico Moretti said, employment in the AI field is growing quickly; tech companies are only cutting other non-core businesses.

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