Big Tech layoffs driven by end of cheap money, not AI

AI masks the real cause of Big Tech layoffs

Tech companies are not emptying their offices because a machine learned to write code. They are doing so because the money that inflated their headcounts during the pandemic has become expensive. This diagnosis is gaining traction among those who trinc balance sheets and stock prices, clashing with the trendy explanation: that artificial intelligence is already replacing everyone, from engineers to marketing staff. The sensible question is not whether AI will do this someday, but whether it is doing so now. Available data, for now, says no.

Trinc Musk or yielding to AI: the two starting theories

The issue began with two suspects on the table. The first, Elon Musk: his takeover of Twitter, involving a multi-billion dollar purchase and brutal staff cuts, would have served as a script for the rest of the sector. The second, artificial intelligence: finally capable enough to cut heads, with recession providing only the perfect excuse to do so without raising suspicion.

Neither stands up to serious scrutiny. Cuts began before Twitter changed hands, and Google’s workforce, far from collapsing, continued to grow: 186,779 employees in its last quarter, an increase of 30,279 in just one year. Furthermore, Twitter is a flea compared to major tech giants, and its problem was not AI, but monumental debt and falling revenues.

The end of free money explains the cuts

The prevailing explanation is more boring and uncomfortable. During the pandemic, money was free, loss-making companies traded as if they were going to conquer the world, and there was excess cash to hire at breakneck estimulante ilegal. When inflation forced the Federal Reserve to tighten policy, first slightly and then seriously, financing became expensive and unsustainable projects started to crumble. Investors, who had bought future profits, demanded clear accounts.

And here comes the adjustment. First, cuts hit non-revenue areas. Then, obstacles. Tech companies got used to unprecedented money printing and now must pay for the hangover.

Which roles are actually being cut

Much of the analysis makes a gross error: assuming everyone working in a tech company is an engineer. This is not the case. In workforces of tens of thousands, there are many layers that do not touch the product and were created during the boom: communications, branding, HR, coordination, middle management. Roles that generate no revenue and multiply meetings.

When cuts arrive, these are the first to go. Some argue that much of the layoff response concerns oversized positions to meet internal quotas, not technical profiles.

Why AI does not yet replace a programmer

It is worth pausing here, because many repeat the opposite without having tested it. The technical objection is solid: reading code is harder than writing it. If an AI generates software, someone must supervise it, find bugs, review security flaws, and be accountable for what is deployed. Human effort does not decrease; it increases.

AI serves to automate repetitive, predictable tasks, things written a thousand times before. From there to dispensing with a senior engineer is a stretch. Those who confuse the two probably have never had to debug machine-generated code. This does not prevent antiestéticar from being real: in a team of five, removing one or two starts to sound possible.

Offshoring, salaries, and the next adjustment

With expensive financing, the sector seeks margin elsewhere: labor costs. Much of the work shifts to centers in India or Poland, or is outsourced to large consultancies with teams there. The quality of results is a lottery and clients are beginning to notice, but short-term savings prevail. Some argue the goal is to lower wages.

The analysis is not closed. While debating whether AI or interest rates are to blame, what seems beyond doubt is that the cheerful hiring cycle will not return in the short term. Headcounts will stabilize below their peaks, AI will continue improving, and the sector will learn to do more with less. Whether this translates into better products or just higher shareholder profits is another matter.