Tech companies in the US are cutting jobs at the same time they are spending heavily on artificial intelligence. The contrast is sharp: AI is increasingly cited as a reason for layoffs, while spending on AI tools and compute is rising to thousands of dollars per employee each month.
In the first five months of 2026, layoffs linked to AI already exceeded the combined total recorded across 2024 and 2025. That shift suggests automation is no longer a side factor in restructuring decisions, but a central one.
Layoffs are accelerating across the sector
Challenger, Gray & Christmas said AI was the leading reason employers in the US gave for job cuts this year. The firm also found that the pace of AI-related reductions has climbed quickly in recent months.
The overall layoff trend has also worsened. After dropping below 50,000 announcements in February, layoff notices rose to more than 60,000 in March, 83,000 in April, and more than 97,000 in May.
May marked the highest number of layoff announcements for that month since the major disruption seen during the pandemic in 2020, according to Challenger, Gray & Christmas. The data points to continued pressure on labor costs and staffing plans.
Technology firms are taking the biggest hit
Technology companies based in the US announced 38,242 layoffs in May, the highest monthly total since August 2024. For the year so far, layoffs in the sector have climbed 66 percent to about 1.23 lakh positions.
The concentration of cuts in technology is notable because many of the same companies are also expanding AI budgets. That has raised questions about whether software and computing infrastructure are beginning to replace parts of the workforce.
AI spending is rising faster than many expected
A new Ramp AI Index report shows that overall AI spending has not yet overtaken payroll. Even so, a small group of companies is already spending at a level that comes surprisingly close.
Tech Crunch, citing the report, described the top 1 percent of AI adopters as “AI-pilled” companies. Those firms spend an average of $7,500 per employee each month on AI tools and computing resources, equal to about Rs 6.4 lakh per employee per month.
Ramp also said this level still remains below compensation for human workers. A median software engineer in the US earns about $16,000 per month, more than double the AI bill at the most intensive companies.
The spending gap is wide across the market. The top 10 percent of companies spend about $611 per employee per month on AI, while the median company spends just $11.38 per employee, roughly the cost of a single enterprise software seat.
Infrastructure costs are climbing quickly
Among companies most focused on AI, per-employee spending rose 14.1 percent in just the last month. Many of these firms are also testing several AI models and platforms at once, switching between premium and open-source options to manage costs.
Executives are already acknowledging the heavier infrastructure burden. Nvidia executives recently pointed to cases where AI infrastructure spending surpassed labor costs, while the chief executive of recruiting startup Mercor said his company now spends more on internal AI use than on its workforce.
The pattern is now clear: layoffs are rising while AI budgets keep expanding. For the tech sector, the pressure is no longer only about cost efficiency, but about how far companies are willing to let automation replace human work.
