Something About the Bay Area AI Boom Doesn’t Add Up

Artificial intelligence has been hailed as the engine of the next great tech revolution, with economic experts even deeming it the ‘largest wealth creation spree’ in modern history.

On paper, it certainly looks that way. Investments in AI giants like Anthropic, OpenAI, and Safe Superintelligence have reached historic highs, leading to valuations nearing $2.7 trillion. Meanwhile, chipmaker Nvidia sits atop a staggering $4.5 trillion market cap amid fears of an AI bubble threatening to burst.

But behind the trillion-dollar headlines, the cracks are starting to show.

The Bay Area — the hub of AI innovation with record venture capital — appears to be straining under the weight of its own expectations.

Tech giants like Google and Meta have trimmed teams this year in the name of “efficiency.” This week, smaller AI-driven startups are following suit.

These two recent layoffs point us to a question Silicon Valley doesn’t often ask: if AI is booming, why are AI workers being cut?

Handshake, an AI-enabled recruitment platform that connects companies with technical talent, recently announced it would cut around 100 jobs, or roughly 15% of its staff, as part of a “refounding” strategy.

Handshake’s company blog post, which was also sent to employees, spoke of “leaner, faster growth” and “AI-forward expansion” by helping AI startups find early-career talent. However, in that same push toward the future, it left dozens of employees behind.

Meanwhile, the AI-powered financial operations platform BILL revealed its own organizational reshuffle, reducing its workforce by 6%. Executives cited a renewed focus on predictive and agentic AI to “increase agility and efficiency.”

It’s important to note that these aren’t struggling companies. Both are performing well and investing heavily in AI — yet they’re shedding workers in the process.

Such business moves have made it harder to ignore that human capital is becoming expendable in the race for AI efficiency and explosive growth.

These layoffs reveal something deeper than cost-cutting. As AI startups disguise their workforce reductions with buzzwords like agility and efficiency, it reveals a flaw in the narrative that AI’s growth is boundless.

For one, companies seem to be realizing that building and scaling AI systems isn’t cheap. Whether it’s training large language models or deploying agentic AI, the digital transformation demands immense computing power, infrastructure, and talent — all of which come with massive costs and uncertain returns.

Layoffs are also largely influenced by board executives and investors, who once fueled the AI gold rush and are now pressuring startups to show profits, even at the cost of their own people.

So, while companies preach agility and innovation, the subtext is clear: the “AI revolution” is being optimized, streamlined, and downsized in real time.

The irony is that AI was meant to create more efficient workplaces by enhancing people, not by replacing them. The same AI startups who promised to eliminate “boring” jobs are also the very same firms eliminating those who helped build them.

In other words, the tools meant to empower workers are increasingly being used to justify their replacement.

It’s worth emphasizing that the recent layoffs — from tech giants like Meta to smaller startups like Handshake and BILL — are not isolated events.

Rather, they’re indicative of a broader correction in the AI economy. While the hype remains sky-high, the reality is that the business models behind it are starting to buckle under the weight of investor expectations and unsustainable costs.

Recall, too, our previous article entitled AI Is Overhyped as a Job Killer, Says Google Cloud CEO, where Thomas Kurian argued that fears about AI wiping out jobs are blown out of proportion. But news of one layoff after another can make you wonder whether these tech leaders’ optimism is misguided.

For many in the industry, the future of work isn’t bright, but looks more like déjà vu. That is, another tech cycle where the people building the technology are the first to go when the margins tighten.