Big Tech Is Falling Apart

On Friday, Alphabet, the parent company of Google, announced it is cutting approximately 12,000 jobs, or 6 percent of its workforce, following what CEO Sundar Pichai called a "difficult economic reality."

Just two days earlier, on January 18, Microsoft announced 10,000 layoffs, constituting around 5 percent of its global employees, with CEO Satya Nadella warning "some parts of the world are in a recession and other parts are anticipating one."

Also on Wednesday, thousands of Amazon workers learned they were losing their jobs, as part of an 18,000-headcount cut first announced by the company in November.

The bloodbath in Big Tech employment has led some to question whether the whole sector is in the throes of a crisis.

Brian McGleenon, a financial journalist and host of Yahoo Finance's The Crypto Mile, told Newsweek the cuts are primarily the result of overambitious forecasts of online usage post coronavirus lockdowns, and the Federal Reserve raising interest rates to battle inflation.

He said: "Big Tech firms such as Google, Amazon, and Meta rapidly expanded during the pandemic lockdown to meet growth projections based upon the subsequent shift towards online working and living.

"The ease of borrowing during the pandemic was a catalyst that allowed tech firms to scale up rapidly. But a hawkish Federal Reserve and a return to pre-pandemic living habits have foiled this economic model."

In November, Mark Zuckerberg's Meta, the company formerly known as Facebook, announced 11,000 job cuts, totaling more than one in eight of the company's employees.

Writing to employees, Zuckerberg said he had decided to "significantly increase our investments," when online activity surged during the coronavirus pandemic, which he predicted would "be a permanent acceleration."

The Meta CEO continued: "Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I'd expected. I got this wrong, and I take responsibility for that."

McGleenon said the cuts to Meta, which followed a dramatic drop in revenue, were also linked to Zuckerberg's focus on "the metaverse," a network of 3D virtual worlds that Chris Cox, Meta's chief product officer, has said will become "as important as the smartphone."

The financial reporter said: "Meta's dogged insistence that metaverse mass adoption is just around the corner and its multi-billion dollar investment in virtual reality R&D now seems like a relic that fails to chime with current macroeconomic conditions."

Meta's virtual reality arm, called 'Reality Labs,' lost an estimated $20 billion between the start of 2020 and its third quarter alone.

Responding to criticism last year, Zuckerberg commented: "I think it would be a mistake not to focus on any of these areas which I think are going to be fundamentally important to the future.

"I think it's some of the most historic work that we're doing. I think people are going to look back on decades from now and talk about the importance of the work that was done here."