Big Tech companies are implementing aggressive cost-cutting measures to finance their ambitious artificial intelligence initiatives, according to leaked internal communications and recent corporate actions. Amazon’s retail CEO Doug Herrington told employees during an internal all-hands meeting to continue reducing costs so the company can fund “big investments in big new businesses,” with AI being a primary focus.
Amazon has made significant progress leveraging AI to reduce operational costs. The company’s investments in AI and warehouse automation have helped lower fulfillment costs, with Amazon Robotics making substantial technological advances. However, Amazon’s retail CFO Gail Carpenter emphasized that cost-cutting isn’t solely about reduction—it enables better customer experiences and strategic investments.
The financial pressure stems from AI’s enormous resource requirements. AI projects demand substantial investments in hardware, data centers, and specialized talent. While expectations for AI’s transformative impact remain high, the tangible financial benefits haven’t fully materialized yet. This creates a challenging situation where tech companies cannot afford to slow their AI investments for fear of falling behind competitors, forcing them to find savings elsewhere.
Amazon has laid off at least 27,000 employees since late 2022 and scaled back less profitable divisions including fashion and fitness programs. The company is also making operational changes, adopting Zoom as the standard meeting application and implementing Microsoft 365 tools.
Meta is following a similar playbook, maintaining its massive technology budget while simultaneously cutting costs. The company recently eliminated thousands of underperforming employees, borrowing from Amazon’s performance management approach, while aggressively hiring machine-learning engineers to bolster its AI capabilities. This dual strategy reflects the industry-wide challenge of balancing fiscal responsibility with the need to remain competitive in the AI race.
The broader trend reveals how AI is reshaping corporate priorities across Big Tech. Companies are essentially “robbing Peter to pay Paul”—cutting traditional business areas and workforce to fund AI development. This strategy carries risks, as AI projects take considerable time to generate returns, leaving companies vulnerable if the anticipated benefits don’t materialize as quickly as hoped.
Key Quotes
As a reminder, this work isn’t just about cost reduction — it enables us to invest in a better customer experience
Gail Carpenter, Amazon’s retail CFO, explained during the internal all-hands meeting how cost-cutting serves a dual purpose—not only reducing expenses but also funding improvements that benefit customers, particularly through AI-powered innovations.
big investments in big new businesses
Doug Herrington, Amazon’s retail CEO, used this phrase to describe where the company plans to redirect savings from cost-cutting measures, with AI being the primary focus of these strategic investments according to the leaked recording obtained by Business Insider.
Our Take
The desperation underlying Big Tech’s cost-cutting reveals an uncomfortable truth about AI economics: despite years of development and billions in investment, artificial intelligence hasn’t yet delivered the transformative financial returns that justify its costs. Companies are essentially making a massive bet on future AI capabilities while cannibalizing their existing businesses to fund it.
This creates a dangerous feedback loop. As each company cuts costs to fund AI, competitors must match or exceed those investments or risk obsolescence. The result is an industry-wide race that prioritizes AI development over workforce stability, business diversification, and short-term profitability.
The human cost is substantial and often overlooked. While machine-learning engineers enjoy unprecedented demand, tens of thousands of workers in traditional roles face displacement. This isn’t creative destruction—it’s a calculated gamble that AI will eventually justify the sacrifice of proven business models and experienced workforces.
Why This Matters
This story illuminates a critical inflection point in the technology industry’s AI transformation. Big Tech’s willingness to implement massive layoffs and operational cuts to fund AI development signals that these companies view artificial intelligence as existential to their future competitiveness, not merely as another technology trend.
The implications extend far beyond corporate balance sheets. The 27,000+ layoffs at Amazon alone represent significant workforce disruption, while the simultaneous hiring of machine-learning engineers highlights the dramatic shift in required skills. Workers in traditional tech roles face displacement while AI specialists command premium compensation.
For the broader business ecosystem, this establishes a concerning precedent. If industry leaders like Amazon and Meta cannot fund AI initiatives from existing revenue streams and must resort to aggressive cost-cutting, smaller companies may struggle even more to compete in the AI race. This could accelerate market consolidation and create barriers to entry.
The strategy also carries substantial risk. AI’s promised benefits remain largely unrealized, and if these massive investments fail to generate expected returns, companies will have sacrificed workforce stability and business diversification for uncertain gains. The pressure to maintain pace with competitors creates a potential arms race dynamic that may not be sustainable long-term.
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Source: https://www.businessinsider.com/big-tech-amazon-meta-cost-cutting-spree-fund-big-ai-2025-2