Artificial intelligence (AI) has fueled a stock market rally, propelling major indices to record highs. However, companies linking workforce reductions to this new technology have not consistently seen their share prices benefit.
An analysis of 23 S&P 500 companies across various sectors examined their stock performance following announcements of layoffs explicitly tied to AI or signaling increased reliance on the technology. As of May 15, 13 of these companies (56%) saw their share prices decline after the announcements. Among those whose stocks fell due to AI-related layoffs, the average decline was approximately 25%.
Athletic apparel giant Nike cited plans to accelerate "automation" at its U.S. distribution centers when it cut nearly 800 jobs in January. By May 15, its stock had fallen nearly 35% since the announcement.
Similarly, Salesforce's stock has dropped about 32% since announcing AI-driven layoffs in late summer last year. The customer relationship management firm eliminated 4,000 positions in September, noting that its AI-powered customer service bot team, "Agentforce," had replaced some support engineers.
In the same month, online marketplace Fiverr reduced its workforce by 30%. CEO Micha Kaufman stated the move was to transform the company into "a leaner, faster, AI-first company with a modern AI-oriented tech infrastructure," resulting in a smaller team. The stock has plummeted 54% since that announcement as of May 15.
While this represents a limited sample, the data highlights a concerning reality: investors remain uncertain about how to assess AI and its potential impact, even as adoption expands, according to Daniel Keum, an associate professor of management at Columbia Business School.
"AI is what we call a macro shock," Keum said. "There's a lot of uncertainty about what it will do. Nobody truly understands... the medium- to long-term effects."
He noted that, while manufacturers promote various applications, in the "vast majority of cases," AI is being used to reduce labor costs.
"Productivity improvements are a zero-sum game. Yes, I'm using new technology... to lay people off... but my competitor is doing the same thing," Keum explained. "If everyone is advancing, the baseline just moves, and nobody becomes more profitable because of it."
Blaming AI? As AI captures headlines, the idea that companies can leverage the technology to cut jobs and other costs has gained significant attention.
One estimate suggests at least 112,000 job losses since early 2025 can be attributed to AI adoption. A study from MIT released last November found AI is currently capable of performing 11.7% of jobs in the U.S. labor market and could save businesses up to $1.2 trillion in wages across industries.
However, according to Allie Watson, a partner at AI-focused venture capital firm UP.Partners, investors struggle to discern whether companies are making genuine AI-driven decisions or merely using the technology as an excuse for traditional cost-cutting or balance sheet missteps.
Watson noted this concept is significant enough to investors and the public that it has earned a specific name: "AI washing."
"Companies will leverage whatever is popular in the media or a widely accepted narrative to cover up the real reasons for their layoffs," Watson said.
Keum added that investors are also grappling with how to measure AI's impact on companies, as several geopolitical and macroeconomic issues simultaneously affect stock performance.
"Major geopolitical shocks like the war in Iran" have led to layoffs, Keum said, while tariff policies announced by former President Donald Trump last year have increased cost-cutting pressure. Additionally, the unwinding of pandemic-era over-hiring is still in play.
"Then, there's the real shock from AI. 'How much can we attribute to that...' Everyone is guessing," Keum stated.
"Layoffs Alone Are Not Enough" Amid this uncertainty, investors are looking for ways beyond layoffs for AI to improve the bottom line, according to Noah Hamman, CEO and founder of investment management firm AdvisorShares.
"Layoffs alone are not enough," Hamman said. "People are looking at... spending, and trying to figure out who can actually get a successful return on all this investment."
Hamman pointed to Google as a company leveraging AI to grow its business. He noted its generative AI tool, Gemini, has driven cloud revenue growth, strengthened its search business, and increased user engagement across the Google ecosystem.
Watson, who invests in physical AI startups, highlighted that emerging technologies are also powering robots designed for manufacturing, industrial, and construction companies. These robots can make dangerous tasks like window washing or wind turbine inspections more efficient and reduce costly workplace injuries, potentially boosting corporate profits.
One point, however, is clear: announcements of layoffs tied to aggressive AI adoption may not be sufficient to lift a company's share price—at least not in the long term.
Comments