AI Investment Boom Sparks Massive Tech Layoffs: Are Your Job and Salary at Risk?

Tech firms are laying off workers and reducing their compensation to fund AI investment, though some question if this approach is sustainable. blocberry/ iStock / Getty Images Plus

For the past few years, the promise of AI has been to enable humans to use the tools as a companion to be productive and replace only lower-end jobs. But continuing a trend that appeared to pick up last year, more tech firms appear adamant on eliminating more positions as AI investment picks up, leaving even highly skilled workers looking over their shoulders on whether they will be next.

According to the site layoffs.fyi, which tracks layoffs, under 40,000 employees at tech companies have been cut thus far in 2026. Notable companies that have announced layoffs include Amazon (100, though other sources say 16,000), Meta (1500), FormFactor (220), Autodesk (1000), and ASML (1700). But these numbers don’t begin to indicate what may be coming in the not-too-distant future.

Profitable, But Still Laying Off

In the era of AI, layoffs are no longer attributed to poor company financial performance. Instead, companies appear to be proactively cutting employees to balance their budgets with AI investments.

For instance, ASML said in its most recent quarterly financial earning statement in late January it was reorganizing to streamline operations and thus would eliminate some jobs, many at management levels. But almost two months later, employees remain in limbo as the cuts have not yet been finalized amidst reported pushbacks by unions, who noted the Dutch-based company still plans to expand some of its facilities.

But the real drama can unfold in coming months as tech companies reportedly engage in more drastic downsizings. Meta, which has engaged in several highly-publicized rounds of layoffs in recent years, axed 1,500 workers in its Reality Labs metaverse unit in January. Now, new reports hint Meta could cut as much as 20% of its remaining workforce, as the firm seeks to offset mammoth investments in AI infrastructure and top-level talent. Some of the cuts could be in AI units themselves. The report quotes one analyst as stating that a 20% staff cut could produce $6 billion in cost savings.

Meta is not the only company considering massive layoffs. Amazon is reportedly considering cutting an additional 14,000 in the second quarter according to a post on American Bazaar Online. The report noted that divisions like Amazon Web Services (AWS) are consolidating entire departments, with small clusters of senior engineers using advanced AI models like Claude Sonnet to manage workloads that previously required dozens of employees. Amazon’s Alexa division, which once employed over 800, now reportedly has a skeletal crew of 23, with remaining hardware development contracted to a team in Bangalore, India that utilizes AI-powered coding tools.

To add insult to injury, the American Bazaar Online post reported sources said process documentation and workflow information from outgoing workers was used in datasets to train the AI agents that replaced them.

Oracle is reportedly planning to cut between 20,000 and 30,000 jobs, about 12% to 18% of its global workforce. The proposed cuts are linked to efforts to control costs as Oracle increases spending on AI infrastructure.

Study Confirms Companies Prioritizing AI

A recent survey of 866 business leaders by the career site Resume Builder paints a dim picture of the current tech job climate. About 46% of the companies surveyed were in technology and software. The survey found that the companies justified their actions by stating that only substantial AI investments would enable them to compete and thrive in a rapidly changing global economy. The survey found:

• 75% say AI provides a competitive edge.
• 74% expect AI to drive revenue growth.
• 57% fear falling behind without AI investment.
• 56% cite board or investor pressure to adopt AI

"This is not reluctant belt-tightening, and these leaders are not apologetic about the choices they are making,” said Stacie Haller, Chief Career Advisor of Resume Builder, in a statement. “They see AI investment as existential and are willing to absorb turnover and employee dissatisfaction as acceptable costs. The weak job market is giving them confidence that they can do this without serious consequences. But the job market will not stay weak forever. Job seekers are already wary of employers using AI to eliminate roles, and organizations that have cut compensation to fund those investments may find that history follows them when workers have choices again,” says Haller.

Further study results reinforce current company attitudes toward cutting compensation or conducting layoffs to fund AI, with companies willing to absorb further human costs:

• 94% expect to reduce headcount.
• 92% say AI investment is a higher priority than employee satisfaction.
• 94% are willing to accept higher turnover to fund AI growth.
• 88% say the weak job market makes it easier to reduce compensation without losing talent.

This Year’s Raise? Only After AI is Budgeted

Even if jobs are not cut, employee compensation is taking a back seat. Resume Builder found that 54% of companies have or will reduce employee compensation to free up capital for AI spending in 2026. By the end of the year, more than half of companies (58%) will have cut employee compensation (54%) or laid off workers (26%) to help fund AI investments, according to the survey.

“Companies are making a clear calculation: AI investment is the priority, and employee compensation is where the budget will come from. This is not just layoffs. Bonuses, raises, equity, benefits, and base pay are all being cut simultaneously, across industries,” said Haller.

Resume Builder added that many companies plan to take a flat, across-the-board approach to raises in 2026, sometimes referred to as “peanut butter raises,” rather than tying compensation to individual performance.

• 71% tie raises to performance.
• 11% offer below-inflation raises.
• 4% plan no raises at all.

“Companies that flatten compensation this way risk losing the people they can least afford to and end up retaining low performers who had nowhere else to go,” added Haller.

Stacie Haller of Resume Builder says more companies are reducing employee compensation to invest in AI. (Resume Builder)

Will it Pay Off?

But will this herd mentality of many firms reallocating budgets to AI help produce the handsome returns they expect? That is far from a sure thing.

According to a Harvard Business Review report, MIT Media Lab/Project NANDA found in a report last year that 95% of investments in generative AI have produced zero returns. That report generated controversy on how widespread AI’s benefits were.

A more recent article in Harvard Business Review, summarizing a survey of 1,006 global executives, said that many companies were cutting jobs in anticipation of AI producing benefits. So far, there is an absence of data to verify that AI investments will reap the benefits companies hope for.

Look Before You Leap

Given the uncertainty of AI payback, the Harvard Business Review article suggests a more measured approach by using these alternative approaches:

• Use attrition instead of large-scale layoffs.
• Redesign workflows with AI as an enabler.
• Communicate AI’s role in enhancing employee productivity.