Booming AI under the knife: Tech layoffs slay 20% of popular startup's workforce

50 tech corporations have already laid off 20,743 employees in 2023, only 11 days into the year.
Baba Tamim
Artificial intelligence virtual concept
Artificial intelligence

Vitalii Gulenok/iStock  

The recent announcement of Scale AI layoffs has served as a reminder that even the most promising startups and IT giants are not immune to the problems of the collapsing tech market as the artificial intelligence (AI) industry continues to grow.

Despite having a CEO heralded as "the next Zuckerberg" and a $7 billion valuation, Scale AI announced the "hardest change" – the layoff of 20 percent of its 700-person workforce on Monday in a blog post.

"I have made the difficult decision to reduce the size of our team by 20%, which means saying goodbye to many talented Scaliens," said Alexandr Wang, CEO of Scale AI, while addressing employees in the blog. 

"If you are among those impacted, you will be contacted shortly with further details via your personal email as well as offered time for a 1:1 conversation with a manager today."

This shocking revelation comes at a time when the AI sector is expanding, with Microsoft allegedly in discussions to invest $10 billion in OpenAI and generative AI businesses like Jasper and Stability AI, raising over $100 million.

It became evident that we needed to realign our investment to adapt to this new climate, given the uncertainty that many of the sectors we serve confront, stated the Scale AI blog. 

"While many other companies have made similarly difficult decisions recently, we spent months looking for ways to avoid it, but unfortunately, we came to the conclusion that we needed to make these changes as well," said Wang. 

The trend of layoffs beyond Scale AI 

However, this trend of layoffs in the AI and Machine Learning (ML) industry is not limited to Scale AI. Other companies, such as Meta and Twitter, have also reduced their AI teams significantly.

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Even the Israeli predictive analytics platform Pecan AI and the autonomous vehicle startup Argo AI have been targeted.

The market for AI and ML job seekers and talent hunters is becoming increasingly difficult, with many unsure how to navigate the gap between hot AI hype and the reality of layoffs.

According to a layoff monitoring website layos.fyi, 154,186 people were let go by 1,021 tech companies in 2022.

The job-cut tracking company, which has been monitoring layoffs since COVID-19 hit the world, documented that 50 tech corporations have already laid off 20,743 employees in 2023, only 11 days into the year.

Opportunity to acquire talent

The industry may be clawed by the crisis, but it could provide an opportunity for enterprise companies, as Big Tech and startup layoffs could mean a chance for CIOs to acquire top AI and ML talent.

Many people find the industry to be "scary" right now, Chip Huyen, a computer scientist and cofounder of Claypot AI, who manages a Discord group for ML students, told VentureBeat

"One of the most popular channels in our Discord right now is under career advice," she said. 

Huyen's startup is seeing an influx of job applications from highly qualified candidates from reputable companies who may have been laid off earlier. 

"There may be [an] opportunity to pick up some talent from the big tech layoffs [depending] on where you are, in what industry," Janelle Hill, distinguished VP analyst at Gartner, told VentureBeat

Meanwhile, the future may be uncertain for those affected by the Scale AI layoffs, but they leave with generous severance packages and the possibility of new opportunities. 

"Tomorrow is a new day, full of opportunities," reflected a former Scale AI employee on LinkedIn.