US tech layoffs record single-highest month in two years, and more than any other sector — nearly 40,000 get the axe, AI the most cited reason for layoffs

Source: Tom’s Hardware

Image credit: Getty / Anadolu

U.S. tech companies announced 38,242 job cuts in May, more than any other sector and the industry’s heaviest month of reductions in nearly two years, according to data published Thursday by outplacement firm Challenger, Gray & Christmas. This lifted the sector’s 2026 running total to 123,653, up more than 65 % compared with the same period in 2025. Tech also held the largest hiring plans of any industry, while the biggest firms raised their combined AI capital spending toward $725 billion for the year. AI was the most‑cited reason for layoffs across every sector for the third month running.

Overall U.S. Layoffs

• Employers across all industries announced about 97,000 cuts in May, up from 83,387 in April.
• Transportation was the second‑largest sector with 6,909 cuts, followed by services with 6,268.
• U.S. employers have announced 80,472 planned hires in 2026 to date, with tech accounting for the largest share of any sector.

Claims for unemployment insurance haven’t risen in line with the layoff announcements, and the Labor Department’s May payrolls report (due Friday) is expected to show 85,000 jobs added.

“AI is now the leading reason companies give for cutting jobs,” said Andy Challenger, chief revenue officer at Challenger, Gray & Christmas.

AI Spending and Layoffs

Several firms on this year’s layoff lists are also the heaviest spenders on AI hardware:

• Google, Amazon, Microsoft, and Meta plan a combined $725 billion in capital spending in 2026, up 77 % on last year.
• Microsoft has attributed $25 billion of its own budget to rising memory and component prices.
• Meta CEO Mark Zuckerberg told staff that the company’s roughly 8,000 job cuts were a direct consequence of its AI infrastructure spending.

Roughly three‑quarters of that hyperscaler capital outlay this year is tied to AI infrastructure such as servers, GPUs, and data centers rather than conventional cloud capacity.

Debate on AI’s Role in Layoffs

Whether AI is actually doing the work of the people being cut remains an unsettled debate. Challenger has ranked AI only the third‑leading stated reason for layoffs in 2026, behind market conditions and restructuring, and the firm logged the technology in more than 49,000 planned cuts through April.

OpenAI’s Sam Altman has accused some employers of “AI washing,” using the technology to justify reductions they would have made regardless. However, flat jobless claims and the expected payroll data gain leave the case for broad AI displacement unproven for now.