Key takeaways

• Layoffs have been sweeping the tech sector, including big names like Meta, Amazon, Shopify and Netflix.
• The widespread downsizing has been driven by a hiring spree during the pandemic lockdowns and the concerning economic headwinds ahead.
• For investors, it means that investing in tech has become more difficult than it used to be.
• Luckily, with the power of AI you can still find diamonds on the rough and the companies best positioned to hold up well if a recession does hit.

Every week seems to bring a new round of layoffs in the tech sector. It started earlier in the year with smaller, growth companies who need to keep a close eye on their ongoing spend, and has now extended to the behemoths of the industry like Meta and Amazon.

Just this week it’s been reported that Amazon is planning to lay off a massive 10,000 employees. This comes off the back of Meta letting go 11,000 workers last week and Elon Musk running a continuous revolving door over at Twitter.

It would probably be quicker to list the companies that haven’t laid off workers this year, but the ones that have include many other big names like Uber, Airbnb, Zillow, Coinbase, Netflix, Spotify, Peloton, Shopify, Stripe and Robinhood.

The stream of sackings has even spawned a website which tracks layoffs across the sector.

But why is this happening? Why are so many companies in the tech sector, even ones still generating big profits, laying off so many people?

The reasons are obviously going to be specific to each individual company, but there are a couple of big themes that are impacting Silicon Valley and beyond.

Download Q.ai today for access to AI-powered investment strategies.

The pandemic hiring frenzy

In many ways, this major round of layoffs is fixing a previous mistake. During the pandemic years, our online lives became our only lives. There was no commuting to the office, no bars on Saturday nights and no pickup basketball or dance recitals.

We were all forced to stay home and we spent a lot more time online. Online shopping became not just a growing retail outlet but the only retail outlet. Netflix, Amazon Prime and the other myriad streaming services took the places of not just the cinema but also nights out at restaurants, work day lunch breaks and date nights.

Despite the global turmoil, this upsurge in online activity led to a boon for tech companies. They pulled in record levels of revenue, which created record profits and fueled a hiring frenzy that drove big salaries and benefits for engineers, developers and other tech workers.

Many tech companies believed that this was the beginning of a ne