It’s no surprise that the technology industry led other sectors to the number of job cuts in 2022.
It found more than 150,000 tech workers received pink slips in the year, a 900% increase from 2021.
In 2023, tech layoffs continue throughout various firms, and let’s go through some of the prominent ones.
Microsoft (MSFT) announced cuts to 10,000 workers, representing approximately 5% of the company's workforce.
Amazon (AMZN) announced 18,000 layoffs across many of the company's business areas, including Amazon Web Services, its healthcare businesses, the robotics unit, and many others.
Google announced 12,000 job cuts in January.
Tech hiring took off during the pandemic as the societal shift toward digital services meant technology firms needed to iterate and boost efficiency.
Many companies became too bold in hiring and in some cases, didn’t have enough work for the new workers.
Growth cratered as the pandemic eased, interest rates rose, and inflation cut into personal spending and increased many business expenses. Tech companies also need capital to invest in artificial intelligence (AI) or other innovations, and reducing staffing is one way to generate cash.
Amid these private company layoffs are reports of current and recently laid off employees dumping private shares, as they need capital in the face of falling valuations.
Another driver for private share selling is the low number of initial public offerings (IPOs), which reached the lowest point in 20 years in 2022.
The lack of potential windfalls from an IPO pushed more employees to sell some of their private shares, which then drops their companies' valuations. Lower valuations impact a company's ability to raise additional capital and strain the available venture capital funds.
The broad-based decimation of high-paying Silicon Valley jobs might be the trigger that plants the seeds for the new era of technology.
One of many unintended consequences of the “great resignation” of 2022 that bled into 2023 is that it refuels the pool of talent across the tech sector.
Many of these workers will find employment with other tech firms for a lot higher pay, but others will take the opportunity to launch their own startups.
A survey of 1,000 laid-off tech workers found 63% of the respondents started their own company after their layoff. And tech workers reported they made more money after starting a company.
Obviously, the new talent won’t be able to produce innovative products right away because of the lag involved.
However, put that many great minds in one room, something genius is bound to sprout up.
And I’m not talking about something marginal like buy now, pay later which is just another variation of a payment service.
I do believe we are on the cusp of another technological renaissance that could boost tech revenues 10-fold.
The pandemic reinforced the trend that many of the Silicon Valley headliners were burnt out. Many took the chance to move to Texas or the beaches in Florida.
I do believe that the next innovative wave is on the way and this time it won’t come from California because so much of the talent left.
In the short-term, these big job cuts from established tech royalty will contribute to higher stock prices but it will send the fired on a mission to reimagine themselves in the form of generation-changing innovation and productivity.
Generative A.I. is just one example of that.
Until then, expect big tech shares to grind up. I hear how bearish everyone is, but point me to someone that is actually selling.
Take for instance the supposed activist genius Carl Icahn, who recently reported of gargantuan multi-billion dollar losses over the past few years because he bet on a tech crash.
As long as there are investors, expect tech shares ($COMPQ) to march higher.
