Meta AI Layoffs: Is the Tech Dream Job Overhyped?

In August, news of Accenture’s investment in data labeling startup Snorkel AI, aimed at bolstering its financial services offerings, was quickly followed by the startup announcing workforce reductions of approximately 13%. This scenario is increasingly becoming a common narrative in the rapidly evolving AI landscape.

The trend is playing out across the industry. In June, Meta’s significant investment in Scale AI was heralded as a vote of confidence in the booming data-labeling sector. However, this investment also served as a catalyst for Scale AI to subsequently shed 14% of its workforce. Similarly, coding AI startup Windsurf, following a failed acquisition attempt by OpenAI, extended buyout offers to its entire staff. After Cognition eventually acquired Windsurf, 30 employees were laid off, with additional buyout options being offered, according to reports. HP’s acquisition of AI pin maker Humane resulted in some staff receiving significant pay increases (30% to 70%), while others faced immediate layoffs.

The trend shows little sign of abating. This Wednesday, Meta announced the layoff of 600 employees within its artificial intelligence unit, as announced in a memo to staff by Meta’s Chief AI Officer (and Scale AI founder) Alexandr Wang.

As major technology corporations intensify their focus on artificial intelligence through acquisitions and strategic investments in agile startups, the employees of these smaller entities are frequently the first to experience the ramifications. With Wall Street now closely examining investments, the priority is shifting away from nurturing startup cultures and ensuring employee satisfaction towards swiftly eliminating overlapping roles. This shift highlights a growing tension between technological progress and the human element of the AI revolution.

“Previously, more weight would have been given to maintaining company culture, ensuring continuity, and related considerations,” notes JP Gownder, Vice President and Principal Analyst at Forrester. “That’s simply not the current climate. Big Tech is primarily focused on trimming down to the absolute minimum viable staff for a multitude of strategic reasons.”

Accenture, Meta, Cognition and HP did not respond to requests for comment.

Job losses after mergers and acquisitions are not novel occurrences, but the approach major technology firms are adopting towards these AI-driven acquisitions feels distinctly different. A contributing factor to this disruption is that large tech companies are still adjusting their workforce composition after several years of pandemic-era hiring sprees. These companies are now under immense pressure to demonstrate ROI from their AI investments, leading to rapid restructuring and workforce optimization.

“As these large tech companies continue to shift towards growth, primarily driven by AI, they will divest, wind down, or restructure assets with lower growth potential or those not considered core to their AI strategy,” explained Malinda Gentry, EY-Parthenon Americas leader for the Technology, Media and Telecommunications (TMT) industry. “This inherently leads to a reduction in workforce requirements or the creation of a more streamlined and efficient workforce.”

“The workforce dynamics and ensuing adjustments we are witnessing are directly influenced by the accelerated advancement of AI,” Gentry stated.

Startup Exits and Shifting Career Landscapes

The World Economic Forum forecasts that AI could potentially eliminate 80 to 85 million jobs worldwide over the next three years, while simultaneously generating as many as 170 million new roles. The immediate challenge for tech professionals is navigating this transitional phase as the industry gradually adopts an AI-enabled workforce. Although startups in this domain offer attractive propositions and potential for future career advancement, their inherent focus on eventual exits introduces volatility into the job market. The pressure to innovate quickly and capture market share often comes at the expense of job security, particularly after an acquisition.

Startups are increasingly less likely to be preserved as independent entities and instead are being integrated into the existing operations of larger tech companies. This trend is unfolding within a labor market where job seekers no longer possess the “job hopping” leverage experienced during the Covid era. The influx of talent combined with economic pressures is creating a buyer’s market for tech giants.

“When you acquire a company,” Forrester’s Gownder points out, “unless the acquisition is solely for intellectual property or customer acquisition, the intention shouldn’t ideally be to eliminate talent. However, the current employer-dominated market leaves employees with limited alternative options.”

The rapid pace of AI development is a significant factor driving workforce adjustments. Many tech companies are betting that AI will reduce or eliminate the need for entry-level positions and are rethinking their organizational structures, placing greater emphasis on senior-level expertise.

“There’s a move towards a flatter organizational structure, eliminating middle management layers,” Gownder explains. “Layoffs are frequently concentrated within this middle management tier. This strategic decision rests on the belief that technology, encompassing collaboration tools and streamlined product development life cycles, reduces the necessity for excessive layers of management.”

Previously, startups would entice employees with the prospect of growing alongside cutting-edge technologies and potentially benefiting from an acquisition by a larger organization. However, many employees now perceive this scenario as a risk, and this uncertainty could impact how AI startups attract talent in the future. Employment contracts may begin to incorporate enhanced equity guarantees or severance packages in the event of an acquisition, reflecting a growing apprehension among workers about being marginalized in such deals. The legal and ethical considerations around these rapidly changing employment conditions are also coming under increased scrutiny.

“The ‘acquire and liquidate staff’ approach is somewhat concerning,” Gownder states. “It could make it challenging for some startups to attract the talent they need if prospective talent is hoping to share in the benefits of a successful acquisition.”

Despite the ongoing turbulence, experts emphasize that layoff announcements don’t provide a complete picture. Accompanying these reductions are active recruiting efforts in areas aligned with AI strategies. Big tech is aggressively competing to secure limited talent in machine learning, data science, and AI safety. The transformation towards an AI-powered tech workforce is irreversible.

“There will continue to be a trend in workforce reduction,” Gentry concludes. “However, this is offset by the continuous need to expand and acquire talent, whether through direct hiring, acquisitions, or strategic partnerships within the broader ecosystem.”