Why Tech Layoffs Aren’t Hurting Tech Stocks

by Jordan Chussler
By Jordan Chussler

By now, I'm sure you've read about the sizable and well-publicized layoffs occurring at the largest tech companies since Q4 of last year.

Amazon.com (AMZN) has issued 27,000 pink slips. Meta Platforms (META) has let go of 21,000. Alphabet (GOOGL) and Microsoft (MSFT) have combined for another 22,000.

So why, of the S&P 500's 11 sectors, are IT and communications performing the strongest since the start of 2022?

In the past month, the communications sector is up 6.94% over that time, and IT has gained 7.12%. Year to date, communications is up 19.31% and IT is up 17.15%.

It largely has to do with the nature of those layoffs and why they were made. According to Forbes, 28% of them — the majority — were roles in human resources.

During the pandemic, competition for tech-savvy workers in remote settings skyrocketed as demand for those companies' products and services surged.

Now, as demand has cooled, so too has the need for recruitment. Additionally, many HR functions are giving way to automation and AI.

So while those aforementioned companies have let go of thousands of employees, massive reductions in payroll have ultimately aided their bottom lines. This, in turn, has seen share prices appreciate at an eye-catching rate.

Over the past three months:

  • AMZN is up 15.38%.
  • MSFT is up 16.87%.
  • GOOGL is up 18.98%.
  • And META is up 74.1%.
Three-month gains for AMZN (dark blue), MSFT (light blue), GOOGL (yellow) and META (orange).
Click here to view full-sized image.

 

The headlines you read in mainstream financial media and see on the nightly news might lead you to believe these layoffs in Big Tech are a harbinger of looming economic and market pain, but the reality remains entirely different.

To learn more about where to this year's profit potential could be hiding, here are this this week's top stories from our team of editors and analysts.

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Jordan Chussler
Managing Editor
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About the Managing Editor

Jordan Chussler is the Managing Editor for a team of research analysts and senior editors. He oversees the development and production of trading and investment products and services reporting on traditional equities, including stocks, ETFs, income vehicles, options and private equity. He is a 15-year veteran of the digital publishing industry and also serves as a contributing writer for Weiss Ratings Daily.

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