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Oracle is reportedly laying off thousands of employees, joining an already long list of tech giants cutting jobs while spending hundreds of billions of dollars on AI data centers.
Microsoft laid off 15,000 people last year. Amazon cut 16,000 jobs in January. Atlassian has laid off 10% of its workforce as part of its AI pivot. Block cut its staff by 40% and claimed that much of the basic coding work needed could be done by AI. Meta, which has clearly set out to develop a god-like “superintelligence” AI, reportedly laid off 700 employees while ramping up its equity incentive program for a small number of executives.
Perhaps you shouldn’t be surprised. Executives at major technology companies have long warned that AI will lead to job losses.. Perhaps they simply forget that these losses do not necessarily come from actual AI tools replacing human workers, but rather from the same old, boring Business 101 reasons from the pre-AI era. To reduce costs.
Executives have linked layoffs to AI in as euphemistic terms as possible to avoid the harsher reality. Many tech companies overhired during the pandemic and are now being squeezed by rising interest rates, inflation, and company leaders’ own decisions to bet on vague predictions about the potential of AI.
It was not immediately clear how many of Oracle’s approximately 162,000 staff were affected. CNBC, citing two people familiar with the matter, said the number was “in the thousands,” and TD Cowen analysts recently predicted that Oracle would lay off up to 30,000 people, among other steps to shore up its finances. Oracle declined to comment.
So while we don’t yet know what Oracle’s strategy is when it comes to job cuts, we do know that the company is in dire need of cash. It is on the verge of becoming an AI power player on a par with Microsoft and Amazon.
That plan hinges on the costly endeavor of building data centers to power AI services for customers like OpenAI. Oracle last month pledged to raise up to $50 billion this year through a combination of debt and equity.
In the early days of Wall Street’s AI frenzy, investors Supporting Oracle’s ambitions, the stock price rose 50% in 2023 and 60% in 2024.
But as the company has racked up billions of dollars in debt and data center construction costs have risen, the mood has changed. Oracle stock (ORCL) has fallen 54% from its September high. Several banks have pulled out of financing Oracle-related data center projects, according to analysts at TD Cowen. And last week, Bloomberg reported that Oracle’s closely watched credit risk index had reached an all-time high. This is another sign that investors are nervous about the company’s debt burden.
Oracle isn’t the only company borrowing money to fuel its AI ambitions, but its free cash flow is much lower than many of its competitors. And Oracle is also focusing its AI future on one giant customer, OpenAI, which has never been profitable and is in the midst of a strategic shakeup to widen its lead against rival Anthropic.
Bottom line: White-collar “catastrophe” predictions by tech luminaries have long been presented as an inevitable consequence of the widespread adoption of AI that will make common computer jobs obsolete. However, there is no evidence that AI is meaningfully replacing workers at scale. So far, the only major workforce disruptions have come from corporate leaders tying their businesses to technologies that have yet to live up to the hype.
