AI Becomes Primary Driver of Layoffs in the U.S.
A report by Challenger Gray & Christmas shows that in May, layoffs announced by U.S. companies related to artificial intelligence reached 38,579, accounting for 40% of all layoffs that month, marking the third consecutive month it has been the primary reason.
The technology sector is the main executor, announcing over 38,200 layoffs that month, the highest since August 2024, primarily achieved through AI optimization of processes and automation of tasks.
Companies are accelerating the replacement of repetitive jobs with AI, shifting funds from labor-intensive roles to investments in technological infrastructure. Tech companies benefit from increased efficiency and expanded AI capabilities, while traditional functional employees face significant pressure.
Source: Public Information
ABAB AI Insight
Challenger Gray & Christmas has been tracking AI-related layoff data since 2023, with approximately 54,836 positions clearly attributed to AI for the entire year of 2025, and reaching 87,714 in the first five months of 2026, showing an exponential acceleration. Tech companies like Cisco and PayPal have significantly reduced their workforce multiple times citing AI restructuring.
In terms of capital flow, companies are redirecting saved labor costs directly towards AI infrastructure, data center construction, and model training investments, quickly achieving ROI through acquisitions of AI startups or deployment of internal tools. The strategic motive is to enhance short-term profit margins and compete for long-term pricing power, rather than merely controlling cyclical costs.
Similar to how Meta and Google have continuously optimized back-office functions through AI-driven efficiency projects between 2023 and 2025, the tech industry is currently transitioning from expansion hiring to AI controlling core processes, with traditional software engineering and operational roles being replaced by highly automated tools.
Essentially, this represents an acceleration of technological substitution, with AI rapidly penetrating white-collar functions. The mechanism is that computing power, with marginal costs approaching zero, replaces high fixed-cost labor, prompting the industry to restructure from labor-intensive to capital and technology-intensive. This short-term exacerbates job mismatches but drives an overall leap in productivity.
ABAB News · Cognitive Law
Technological substitution first cuts functions, then reshapes organizations, with the winners always being those who master the leverage. Efficiency equals layoffs; after leverage is amplified, structure determines who stays and who goes. In the short term, time is sold for stability; in the medium term, skills are sold for survival; in the long term, technology controls structure.