A startling shift in the US jobs data has reopened one of the most unsettling debates in today’s economy: Is artificial intelligence truly eliminating jobs, or are companies cutting payrolls to finance the costly race to build AI?The question resurfaced sharply after US payrolls reportedly fell by 92,000 in February, a striking reversal from economists’ expectations of a 50,000-job increase as reported by Fortune. The unexpected contraction has drawn fresh attention from investors, executives and employees alike, many of whom are already grappling with the uncertain future of work in an AI-driven economy.
For months, the dominant narrative has been simple: Artificial intelligence is making companies dramatically more efficient, allowing them to do the same work with fewer people. But some analysts now argue that the story may be unfolding in the opposite direction.
Instead of AI replacing workers, workforce reductions may be helping companies afford the enormous costs of building and deploying the technology.
The price tag of the AI race
Artificial intelligence is rapidly becoming the most expensive technological transformation in decades. Research firm Gartner estimates that global spending on AI will reach $2.5 trillion in 2026, marking a 44% increase from the previous year as reported by Fortune.
Corporations across industries, from finance to cloud computing, are pouring billions into infrastructure, software tools and specialised chips needed to power the technology.But such massive investments require funding, and companies often look first to their largest expense: Labour. Brad Conger, chief investment officer at investment advisory firm Hirtle Callaghan, believes that many companies are quietly redirecting payroll savings toward AI spending rather than replacing workers with machines outright. The firm manages about $25 billion in assets for institutional clients, including university endowments and philanthropic organisations.“You see it at our company,” Conger told Fortune. “We’ve bought five different AI software products in the past six months. AI is better at little functions, but doesn’t replace people overall.”Conger says the technology typically handles fragments of work rather than entire jobs. “A job does 100 things in a day, and that’s a lot more than a single AI workflow can perform,” he explained in an interaction with Fortune. “It replaces activities that are just pieces of jobs. We have programmers who have to debug what AI produces.”At his own firm, he said, adopting AI tools has not eliminated any positions.
When layoffs are blamed on AI
Yet many technology companies have presented workforce reductions as a natural consequence of AI-driven productivity. Fintech company Block, led by co-founder Jack Dorsey, recently announced plans to cut 10,000 employees, about 40% of its workforce. Dorsey described the move as part of a broader transformation enabled by artificial intelligence.“This decision comes from a position of strength,” Dorsey said to Fortune. “Intelligence tools have changed what it means to run a company. A significantly smaller team using the tools we’re building can do more and do it better.”Conger, however, believes such explanations can sometimes obscure deeper business realities. In Block’s case, he argues the company expanded aggressively in recent years and is now correcting course.“Block is an incredibly inefficient business,” Conger told Fortune. “Now they say AI made them more productive and therefore they can lay off people. They had no choice but to pivot. AI’s an excuse for the inevitable.”
Cost-cutting meets AI investment
The overlap between layoffs and rising AI budgets is becoming increasingly visible across the technology sector.Enterprise software company Workday announced in February that it would eliminate 1,700 jobs, about 8.5% of its workforce. CEO Carl Eschenbach said the move would help prioritise investment in artificial intelligence and redirect resources toward emerging technologies.The pattern is particularly striking at Amazon, where workforce reductions have coincided with soaring capital expenditure.Between October and January, the company revealed plans to eliminate 30,000 positions. Over roughly the same period, Amazon’s capital spending surged from $53 billion in 2023 to $133 billion in 2025, with CEO Andy Jassy signalling that spending could reach $200 billion in 2026.
A bet that hasn’t fully paid off yet
Despite the confident rhetoric from corporate leaders, Conger remains cautious about declaring AI a true replacement for human workers. In his view, the technology is still far from capable of handling the full complexity of most roles.“We simply don’t know if AI will eventually allow companies to work just as well, or even significantly better, with far fewer employees,” he told Fortune. “But we’re not seeing that right now.”Instead, he suspects that AI is often invoked as a convenient narrative for layoffs that companies needed to make anyway, or as a justification for workforce cuts intended to fund a massive technological gamble.If that interpretation proves accurate, the current wave of job reductions may reflect less about machines replacing humans and more about companies placing a long-term bet on AI’s future potential.For workers, however, the distinction may offer little comfort. As businesses race to secure their position in the AI era, employees may increasingly find themselves financing that future, one layoff at a time.