Amazon is planning its largest-ever layoffs, aimed at cutting costs and conserving cash so it can invest more resources in artificial intelligence (AI), a core area crucial to its future competitiveness.

On Monday (October 27th), media outlets, citing sources familiar with the matter, reported that Amazon plans to lay off up to 30,000 employees, potentially starting as early as Tuesday (October 28th).

The layoffs represent approximately 10% of the company's total white-collar workforce and will affect several business units, including human resources, cloud computing, and advertising.

Amazon currently has approximately 1.55 million warehouse and delivery employees, and any reduction in headcount to below 800,000 would trigger panic.

Media reports indicate that Amazon is expected to notify affected employees via email on Tuesday morning. Layoffs of this magnitude would be the largest corporate workforce reduction in Amazon's history. Faced with increasing competition in the cloud computing business, Amazon CEO Andy Jassy is leading the company's aggressive investment in AI, explicitly stating that the application of generative AI will transform the company's operations and ultimately reduce the need for some positions.

Jassy's AI Blueprint: Generative AI Will Reshape Jobs

Amazon has begun demonstrating how its AI investments are helping to reduce costs, drive sales, and reduce reliance on human labor.

For example, a robotic arm called Blue Jay is expected to enable Amazon to build smaller warehouses in urban areas where it can't operate. The company is also experimenting with using AI tools to predict customer shopping intent to improve sales conversions.

Amazon's layoffs are part of CEO Jassy's cost-cutting initiative, which began during the COVID-19 pandemic. Jassy has also pushed the company to streamline management layers, striving for a "de-layered, flatter organizational structure."

In June, Jassy indicated that Amazon's workforce may shrink as the company increasingly uses AI to perform tasks previously performed by humans. This statement sparked panic among employees, with many seeking inside information about potential layoffs on anonymous forums. However, fragmented information made it difficult to gauge the overall scale and scope of the layoffs.

Jassy wrote in an internal memo at the time:

In the future, we will need fewer people in some roles, but more in other types of positions. While it's difficult to predict the exact changes at this point, we expect our overall headcount to decrease over the next few years as we broadly use AI to improve efficiency across the company.

According to media reports, citing sources familiar with the matter, Jassy repeatedly emphasized in internal meetings and planning documents over the past year that the company should further automate and delegate more tasks to AI tools. He also stated that despite multiple rounds of layoffs over the past three years, the rapid expansion during the pandemic had left some departments "bloated and inefficient."

Furthermore, media reports earlier this year indicated that Amazon was requiring some employees to relocate to offices closer to management and teams. Employees were asked to relocate to locations such as Seattle, Arlington, Virginia, and Washington, D.C., with some even having to relocate across state lines.

Amazon's last major layoff occurred between late 2022 and early 2023, when it laid off over 27,000 corporate employees. CEO Andy Jassy initiated the cost-cutting plan after the company's rapid expansion during the pandemic.

Since then, Amazon has carried out smaller, team-specific layoffs, affecting its cloud computing, retail, communications, and devices divisions.

As of June 30, Amazon was the second-largest private employer in the United States, with approximately 1.55 million employees worldwide, the majority of whom were warehouse workers. Its corporate workforce numbered approximately 350,000.

Pressure in the AI ​​Race, Investor Scepticism, and Huge Investments

Despite its diverse businesses, including retail and live sports, Amazon's market capitalization of over $2 trillion is increasingly reliant on its prowess in AI. However, investors once believed Amazon was lagging behind its competitors in the AI ​​race.

In July, despite reporting significant growth in second-quarter sales and profits, its cloud computing business grew slower than Microsoft and Google. Following the earnings report, Amazon's stock price fell 7%.

In a note to clients, Bernstein noted that Amazon's results raise "uncomfortable questions" about whether the company should be considered an "AI winner" or a laggard.

In response to this pressure, Amazon is pouring money into the market. The company's financial report shows that capital expenditures rose to $31.4 billion in the most recent period, with the majority going toward investments in AI and cloud computing.

Amazon stated at the time that this figure "reasonably represents" its planned spending for the remainder of the year. Clearly, saving costs through layoffs and increasing investment in AI has become a necessary choice for Amazon in this crucial race.

It's not just Amazon; corporate giants are embracing AI to reduce staff and increase efficiency.

According to the website Layoffs.fyi, Amazon's layoffs will be the largest in the tech industry since 2020.

As of Monday (October 27), over 200 tech companies have laid off approximately 98,000 employees since the beginning of the year. Other major tech companies have also recently announced job cuts:

• Microsoft has laid off approximately 15,000 employees this year;
• Meta laid off approximately 600 employees in its AI division last week;
• Google cut over 100 design-related positions in its cloud division earlier this month;
• Salesforce CEO Marc Benioff said in September that the company had laid off 4,000 customer service employees, in part due to the increased efficiency of generative AI;
• Intel laid off 22,000 employees this year.

Layoffs.fyi predicts that 2023 will be the year with the most layoffs in the tech industry, with nearly 1,200 tech companies cutting a total of approximately 260,000 jobs, citing factors including high inflation and rising interest rates.

Over the past year, industries across the technology, banking, automotive, and retail sectors have noted that the rise of generative AI is or will soon change the workforce structure of their businesses.