Yes, AI is to Blame for the Microsoft Layoffs

Microsoft has laid off over 15,000 employees in the past two months, but its rationale for doing so is vague and unbelievable. But if you parse the company’s public statements, a truth emerges. As so many suspected, AI is behind those layoffs. But not for the reasons so many suspected.

This week, Microsoft announced a new initiative called Elevate through which it will donate over $4 billion in cash and AI and cloud technologies to K-12 schools, community and technical colleges, and nonprofits. And to sell this vision of AI being used for good, it held a press conference hosted by Microsoft president Brad Smith. Predictably, Smith was first asked about the layoffs when he took questions from the audience. His answer is illuminating.

As reported by GeekWire, Smith claimed that efficiency gains from AI “were not a predominant factor” in the recent two rounds of layoffs. “The notion that AI productivity boosts have somehow already led to this, I don’t think that’s the story in this instance,” he said.

The word “predominant” suggests that AI efficiency gains did play at least some role in the layoffs. But that’s just semantics. In a follow-up interview, Smith implicitly acknowledged that AI was, in fact, behind those layoffs.

Smith said that Microsoft’s astonishing rise in capital expense spending in the past few years raised pressure internally to rein in its operating costs and that those costs were “more about the number of employees than anything else.” Microsoft’s cap-ex spending–over $80 billion in the recently concluded fiscal year and rising quarter-to-quarter–is almost 100 percent tied to AI infrastructure build-out. And so AI is to blame for the layoffs. It’s that simple.

Smith also admitted that the layoffs had nothing to do with employee performance.

“Success in life, whether it’s for an individual or a company or any kind of institution, is always about prioritization, and it’s always about investing in the future,” Smith said of the layoffs. “It doesn’t mean that anyone should feel better. That’s not what I’m arguing. These kinds of decisions are always difficult.”