Since the beginning of this year, Meta, Amazon, Microsoft and Google have together eliminated more than 50,000 jobs in a rare and ongoing wave of tech sector layoffs. While job cuts of this magnitude are an unpleasant shock to tech workers in Silicon Valley, so far they have been a nice boost to these companies’ stock prices. And it may actually be a healthy change for the tech industry, analysts say.
With the exception of Microsoft, all the major companies with layoffs in recent weeks have seen their share prices soar more than 10 percent this year so far and outperform major indexes.
Shares of Google parent company Alphabet have jumped more than 12 percent; Meta has gained 22 percent; and Amazon is up 19 percent. Salesforce, which slashed its workforce by 10 percent this month, has enjoyed a 24 percent stock rally in 2023. Cryptocurrency exchange Coinbase has seen its share price nearly doubled since laying off 20 percent of its employees and the broader crypto market rebounded from last year’s slump.
Over the same period, the Dow Jones Industrial Average rose less than 3 percent. And the tech-heavy Nasdaq index has gained 12 percent.
Despite the turmoil in the tech sector, the overall U.S. jobs market remains robust, and GDP data released this week shows the economy is in solid shape, leading many to wonder if the widespread job cuts are just the tech industry puncturing its own bubble.
“Silicon Valley needs to reign in expenses after a decade of spending money like 1980’s rock stars,” said Dan Ives, a tech analyst at Wedbush Securities, in a tweet. “While painful, this is a positive for tech stocks to preserve margins and profits in the near-term (macroeconomic) storm.”
According to tech CEOs, the ongoing layoffs are primarily a correction to over-hiring during the pandemic. Google, for example, grew its headcount by about 50,000 in 2020 and 2021 and is now cutting 12,000. “We hired for a different economic reality than the one we face today,” Google CEO Sundar Pichai said in a letter to his staff last week. Amazon, Meta and Microsoft cited similar reasons when announcing layoffs. Even after the cuts, many of these companies are still significantly expanded from pre-pandemic scales.
“The tech sector has been growing for 13 years straight since the last recession,” said Scott Galloway, a tech commentator and a marketing professor at New York University. “Meta laying off 11,000 people only takes its (staff size) back to November 2021 levels. If you look at the layoff numbers, the numbers are real but they are not significant.”