($) Is 2025 the Year of the AI RIF?
AI RIF is the best, if not only, form of walking the walk to show what AI can really do
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RIF, or Reduction in Force, is one of these euphemisms in corporate tech culture that gets used to soften the narrative blow every time layoffs happen. Reasons for these layoffs, sometimes company-wide, sometimes sector-wide, can come in many flavors, but they are usually caused by external factors.
The last time this happened was in 2022-2023. It was a period that followed a stretch of Covid-induced hypergrowth, which was quickly followed by supply-side inflation that led to a rapidly rising interest rate. This external, macro shift made both the customers of technology tighten their belts and the makers of technology rethink how many people and office buildings they really need when each dollar saved could generate 5% risk free interest in their corporate coffer. Consequently, mass RIFs ensued across the tech sector. (I experienced this period first-hand while working at GitHub. Thankfully, neither my team nor I was affected.)
The year 2025 could very well shape up to be another year of sector-wide RIF in tech, except this time the major driving factor is internal, not external, namely AI itself. Over the last two months, we have seen different tech CEOs write memos to employees on this matter to get ahead of the thought-leadership curve (Shopify, Box, Duolingo, to name a few). In the case of Crowdstrike and Microsoft, the actions were more decisive with each laying off 5% and 3% of its workforce, respectively, where internal AI adoption and productivity gains are speculated to be the major drivers. In a recent article, Bloomberg called out a few more companies that have publicly cited AI as the reason for hiring freeze – Intuit, Expedia, Palantir, and even Coca-Cola.
When I articulated my major AI investment themes of 2025, where software picks and shovels would be more front and center to power AI agent adoption, I did not anticipate that the impact will be this quick on the tech workforce. Contrary to how Bloomberg and others have framed this impending “AI RIF”, calling it a “contradiction” for companies like Microsoft to do these layoffs, I think these RIFs are a natural progression of AI adoption that must first happen inside the companies who build and sell these AI products.
It is not a contradiction. It is walking the walk. Here is why.