The unpredictability of some markets baffles even the ones most involved in them. Experts are analyzing all the variables, and the results are exciting. The previous year marked the continuous trend of layoffs at big companies. An interesting fact is that the biggest job cuts are being done by the tech companies. They have been on the rise in the last couple of years, but 2022 and 2023 combined marked hundreds of thousands of layoffs. Management states that their hands are tied by the never-ending rise of interest rates, but some analysts suspect that this trend is due to other reasons. The coronavirus outbreak, the fact the companies hired more employees than it was needed, and the market finally having enough of a quality workforce. But how did it all impact the stocks of those companies?
Why Are Tech Companies Firing Employees?
Before any conspiracy theorists start talking about this subject, let us just conclude that this is nothing new in the business world. Companies have always conducted layoffs when they were battling with cost cutting. Each one of them has revenue and costs, and no one makes a big deal when the profit is high, and bonuses are shared. That type of good news can usually be found at Promoguy, but we will let you find that out by yourself. However, when a business operates in a way in which costs are higher, management faces some tough decisions. When they have some raw materials or products they can sell, they might lower the prices, but tech companies most often sell knowledge. And that is why employees are the first to go.
Impact of Layoffs on the Stocks
When we talk about a company that is releasing its employees, we can only state that it is a bad thing and that they are not operating as they wanted. The job cuts can hurt the performance of the company on ongoing projects, and investors are very concerned when it comes to that. But the latest trends do not comply with that common opinion. Tech companies such as Meta, Alphabet, and Microsoft have been very transparent with their downsizing. Over 250 thousand people have been let go just from these companies since 2022, and the companies’ stocks are on the rise!
The Nasdaq is at its highest since 2021, and Wall Street is the biggest advocate for the whole Silicon Valley industry. Alphabet shares recorded the highest value a couple of days ago, while Microsoft and Meta overcame the 3 trillion USD market cap. This information was available to other tech companies’ management as well, and according to reliable sources, we have seen almost 24 thousand layoffs from over 80 companies. And the month is not even over when the data is presented. This is the highest number of job cuts in this industry since March 2023, when 38 thousand people were fired.
Conclusion
Experts and officials are unanimous in stating the opinion that all this is created as companies turn their focus on AI. Artificial Intelligence represents the next step of evolution for these companies and is the only logical way they want to go. Since it represents something very exciting and new, investors see this as an opportunity rather than a risk. And that is why we are witnessing the rise in the value of shares of these companies that are firing their employees.
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