For years, tech CEOs have used AI as an excuse to justify layoffs. In reality, though, many experts say that what’s really happening is that execs are diverting financial resources into AI at the expense of everything else — including employee retention.
In one of the most egregious examples yet, cloud software company Teradata told its more than 5,000 employees not to expect a raise this year because its budget was being spent on AI instead, according to an internal memo obtained by Business Insider.
“We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments,” Teradata CEO Steve McMillan wrote in the memo.
Besides likely drawing the ire of everybody involved — as if there wasn’t enough of a growing anti-AI sentiment as it is — it may not have been the wisest choice. Tech leaders are starting to question whether sidelining human labor in favor of AI investments was such a good idea after all.
For one, researchers are finding that many of these investments are simply not paying off, leaving leadership to hold the bag. An oft-cited MIT report from last year found that a staggering 95 percent of AI pilot programs at companies are failing and delivering little to no measurable impact on profits.
Then there are the soaring costs of actually replacing human staffers with AI, with employers racking up enormous AI coding usage fees and leading some to wonder whether employing workers was actually cheaper.
In short, the line of thinking that AI will eventually replace workers and bring down costs is being seriously challenged by reality, making moves like cutting raises in favor if AI investments a highly questionable one.
Experts also told BI that Teradata’s unabashed admission marks a notable change in the way tech leaders speak about their decisions.
“Whether that’s more honest or more cynical depends on your read, but it does mark a real shift in what leaders are willing to say in public,” workplace strategist and author Jennifer Moss told the publication. “And what becomes sayable tends to become more doable.”
To some, it’s a sign CEOs are trying to send signals to investors that they’re willing to embrace cutting edge tech at all costs — which could end up backfiring.
“When leaders openly cut human compensation to fund AI, they are trying to project decisive, tech-forward management,” Oxford University economist Jan-Emmanuel De Neve told BI. “However, the actual message traveling to the workforce is that they do not have a secure future in the organization.”
More on AI and labor: Large Study Finds That Replacing Workers With AI Is Backfiring Badly
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