/cloudfront-us-east-2.images.arcpublishing.com/reuters/ZB6AJ3V5AJMVPFBETAFUVIBN2A.jpg)
The huge wave of tech layoffs is laying the groundwork for a 20% rally among stocks in the sector, Wedbush says
Business InsiderDec 23, 2022
The Facts
Amazon on Monday announced it will lay off another 9K employees in the coming weeks, mostly in its advertising and cloud computing divisions — just two months after it terminated 18K people.
In his memo to staff, CEO Andy Jassy cited the current economy as well as "uncertainty that exists in the near future” for the layoffs. He added, "we have chosen to be more streamlined in our costs and headcount."
The Spin
Narrative A
These companies have no choice but to downsize. The pandemic tech boom allowed companies to increase their workforces by as much as 200%, but the economy has since turned for the worse. With the US Federal Reserve reacting to inflation by hiking interest rates, there’s less available venture capital, and digital-ad revenue has dipped.
Narrative B
Instead of layoffs, which are an old-school way of dealing with a recession, companies should find alternative strategies because social media has made everyone a workers' rights activist with a global microphone. Companies that conduct layoffs suffer from poor optics, the cost of restructuring, and the low morale they create — leading them to perform poorly.
