AI-related layoffs a boost for stocks? Not necessarily

Source Domain: www.cnbc.com

Artificial intelligence has ushered in a bull run in stocks that has taken the broader market to new heights. Companies that have tied workforce reductions to the new technology, however, haven’t always fared so well.

CNBC compiled a list of 23 S&P 500 firms across multiple sectors and industries to see how their stocks fared following layoffs linked to AI. Specifically, we looked for companies that explicitly cited artificial intelligence or hinted at increased use of the technology when announcing the workforce reductions.

As of May 15, 13 of those companies, or 56%, have traded in the red from the time of their layoff announcements. For corporations whose shares fell after their AI-linked layoffs, the average decline was about 25%.

Footwear giant Nike cut nearly 800 workers in January, citing a plan to accelerate “automation” at its U.S. distribution centers. As of May 15, the stock was trading down nearly 35% from the time of its workforce reduction.

Similarly, Salesforce has shed about 32% since news of its AI-driven layoffs became public around the end of last summer. The customer relationship management company slashed head count by 4,000 workers in September, noting that its AI-powered team of customer service bots called “Agentforce” had replaced some support engineers.

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Later that month, online marketplace Fiverr also laid off 30% of its staff to become “an AI-first company that’s leaner, faster, with a modern AI-focused tech infrastructure” and a smaller team, according to CEO Micha Kaufman. The stock has plunged 54% from that time to May 15.

While only a small sample size, the data underscores an uncomfortable reality: Investors don’t know what to make of AI and its potential impacts, even as usage of the technology widens, Daniel Keum, associate professor of management at Columbia Business School, told CNBC.

“AI is sort of what we call a sort of macro shock,” Keum said. “There’s a lot of uncertainty in what…

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