Ask Lemmygrad

A lot of tech companies aren't actually profitable and don't have a solid business model. They largely live off VC funding, and their goal is to show growth so that investors keep pouring money into them. This generally translates into hiring a bunch of people to show how quickly the company is growing. The key here is that the goal of hiring is to project an image of rapid expansion as opposed to legitimate need for more workers.

Now that the inflation is rising, VCs are tightening up lending because any companies that don't grow at least as fast as inflation is rising are now losing money. With VC funding drying up, companies need to cut costs to stay afloat and that means cutting all the people they hired to demonstrate growth. The equation has changed in favor of trying to actually be profitable which means cutting operating costs as much as possible.

The tech sector started employing a lot of people when the pandemic began. Because of how internet-reliant the world had become because of lockdowns, many tech companies saw a boom and overhired because of the growth. Now to no one's surprise the rate of growth has stagnated so they are shedding employees to maintain the bottom-line and protect the shareholders.

The tech sector grew up on a glut from cheap credit before the Fed started raising interest rates, but now that rates are up and are staying up they have to start paying down debts.

At least, that's my understanding from hearing finance dorks whine lol

the specific reasons are actually quite opaque. of course the main reason is because these companies want to impress their wall st masters by increasing profits. there are given reasons but none of them are worth trusting. tech compensation and headcount increased a lot ($300-$400k TC for < 5 YOE) so I suspect they are colluding to suppress wages. A lot of people also point to Elon’s twitter takeover inspiring these firms to see how deep they can cut on headcount before they bleed out. there’s also mounting pressure on multiple fronts: increased competition from OpenAI and China (Temu, Tiktok), higher interest rates (can’t pay high wages without a money printer), slower top-line growth projections, etc.