Artificial intelligence (AI) is becoming a core issue in the wave of layoffs in the U.S. tech industry. According to a report released this month by career transition firm Challenger, Gray & Christmas, among layoffs announced by U.S. companies between January and February 2026, 12,304 cited AI as a reason, accounting for 8% of total layoffs during the period.

Overall, in the first two months of this year, employers across U.S. industries announced a total of 156,742 layoffs, the lowest for the same period since 2022. However, the tech industry bucked the trend, with cumulative layoffs reaching 33,330, a surge of 51% compared with the same period last year. Amazon and digital payments company Block are the major tech firms driving this increase.

"The tech industry is simultaneously dealing with multiple pressures," Andy Challenger, chief revenue officer of Chicago-based Challenger, said in the report. "AI is the big story, but there are also global regulatory concerns, tariff-driven slowdowns in digital advertising, economic uncertainty, and rising costs of hiring employees and obtaining capital, forcing companies to make difficult decisions."

Close attention from the Federal Reserve and lawmakers

Federal Reserve Governor Lisa Cook said last month that AI could have a "profound impact" on monetary policy. Speaking at the National Association for Business Economics conference in Washington, she noted: "AI's potential is enormous, but I am cautious about its widespread adoption. The emergence of AI will become the latest example of 'creative destruction' described by economist Joseph Schumpeter nearly a century ago. We seem to be approaching the most significant reorganization of work in generations. This shift may create new opportunities, but it may also come with costs."

The issue has also drawn the attention of members of Congress. Democratic Senator Brian Schatz (Hawaii) plans to introduce two AI labor bills in the coming months. According to an Axios report in late February, one bill would establish worker retraining programs by imposing a "progressive non-deductible excise tax" on AI company revenue; the other would trigger an "automatic, government-wide response" if the unemployment rate exceeds 5.5% for two consecutive quarters.

Another legislative effort comes from Democratic Senator Lisa Blunt Rochester (Delaware), whose bill S.3319 would require the Departments of Labor, Commerce, and Education to jointly produce a report analyzing AI's impact on the economy and the job market, along with recommendations for preparing the 21st-century workforce.

"I believe in the promise of innovation, but we must ensure this technology serves us, works with us, and does not replace us," Blunt Rochester said in an emailed statement. "Attributing mass layoffs to AI, as Block recently announced, is happening at an alarming pace."

Since Challenger first listed AI as a reason for layoffs in 2023, AI has been cited in 91,753 U.S. layoff announcements, accounting for about 3% of all layoffs during that period.

Major layoffs at Amazon and Block

In January, Amazon announced it would cut 16,000 jobs, citing ongoing restructuring. Although the tech giant continues to invest heavily in AI, the announcement did not explicitly mention AI technology. In a letter to employees dated January 28 and later posted on the company's website, Beth Galetti, Amazon's senior vice president of People Experience and Technology, said: "As we make these adjustments, we will continue to hire and invest in strategic areas and key functions."

Meanwhile, Block said last month it plans to reduce its workforce from 10,000 to just over 6,000 employees, relying on AI to replace the eliminated roles. Block CEO Jack Dorsey wrote in a letter to shareholders: "The core thesis is simple: intelligent tools are changing what it means to build and run a company. We are already seeing this internally. A significantly smaller team, using the tools we are building, can do more and do it better. And the capabilities of intelligent tools are compounding every week."

Jack McCullough, founder and president of the CFO Leadership Council, commented in an email: "Block's announcement may be one of the clearest examples of a profitable company explicitly linking mass layoffs to AI-driven productivity. If Block improves its margins and maintains growth while significantly reducing headcount, boards will inevitably ask their own CFOs what level of productivity benchmarks should be set."

McCullough warned that the biggest risk is not just severance costs, but the loss of institutional memory. "AI can automate workflows, but it cannot replace the experience of employees who understand customers, controls, and historical decisions. Cutting too deep may improve short-term margins but increase long-term operational risk."

Others have questioned Block's attribution of layoffs to AI, suggesting other factors may be more important. J. P. Gownder, vice president and principal analyst on Forrester Research's Future of Work team, said in an email: "Overall, AI may play only a secondary role, but 'AI washing' makes everything sound more acceptable. It makes companies appear advanced and innovative, rather than responding to the financial decisions all companies face."

Gownder noted that one possible factor in Block's layoff decision is over-hiring, which was common among large tech companies from 2020 to 2023. According to securities filings, Block's headcount nearly doubled between fiscal 2020 and fiscal 2025, from 5,477 to 10,205. Additionally, the company's stock price has fallen 75% from its all-time high, "indicating financial pressure from Wall Street."

In a February 26 post on X, Dorsey said the layoff decision was not due to "distress," but rather that intelligent tools have fundamentally changed "what it means to build and run a company." He wrote: "Decisions of this scale come with risk, but so does standing still. We have thoroughly reviewed and determined the roles and people needed for reliable future growth, and we have stress-tested these decisions from multiple angles. I accept that we may be wrong in some areas, and I have built in flexibility for that."

According to 2025 research by workforce planning software provider Orgvue, about four in ten business leaders have laid off employees due to AI deployment, with 55% admitting they made the wrong decision.

Experts call for developing "guiding principles"

Elana Schrank, partner in Operations, People & Change at global consultancy Baringa, said in an email that before proceeding with AI-driven layoffs, companies should develop "guiding principles," with CFOs playing a central role in collaboration with other key management leaders. "They should consider developing policies or criteria around augmentation versus replacement, bias mitigation, responsible transition, communication, and transparency."

McCullough added that finance chiefs also need to be prepared to prove with concrete metrics that AI implementation truly creates value. "Credibility comes from specificity. Simply saying 'AI makes us more efficient' is not enough. Leaders need to explain which workflows were automated, what percentage of work was shifted, and how remaining employees will create higher-value output. If they cannot demonstrate the productivity math, it may be perceived as cost-cutting in the name of innovation."