The news: Microsoft is laying off 5% of its staff, affecting 10,000 employees mostly from its engineering divisions, while it is refocusing heavily on artificial intelligence, per Bloomberg.
Layoffs could foreshadow a wider pivot to AI: Microsoft, which cut about 1,000 of its employees in October, will take a $1.2 billion loss in Q2 related to “severance costs, changes to our hardware portfolio, and the cost of lease consolidation.”
Why it’s worth watching: The timing of the layoffs comes a week after Microsoft committed to investing $10 billion in OpenAI, the company behind the transformative ChatGPT AI.
An alarming time for the tech sector: The deluge of layoffs in the tech sector is expected to continue and could affect nearly every company in the segment.
Our take: The Cambrian explosion of widely available generative AI tools during an economic upheaval could result in reduced hiring and increased layoffs, but AI is not foolproof and could potentially introduce problems that AI alone can’t solve.
But given a void of government oversight of the technology, expect companies like Microsoft to continue a cavalier approach as the legal system catches up.
This article originally appeared in Insider Intelligence's Connectivity & Tech Briefing—a daily recap of top stories reshaping the technology industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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