“Corporate Ozempic.”
That’s how marketing professor and public figure Scott Galloway describes AI.
And just as some Ozempic users are shy to reveal they’re taking the drug, many corporate managers are hesitant to admit they’re using AI to trim their workforce.
Instead, we’re getting phrases like “cost-cutting efforts”, “focus on efficiency”, and the latest buzzword, “cost avoidance.”
But make no mistake – what we’re seeing is a swap-out of human workers for AI/robotics.
Here’s The Wall Street Journal:
Businesses are starting to link their artificial intelligence initiatives with paring back hiring plans, or so-called cost avoidance, in an effort to justify investing in the technology…
Cost avoidance is an appropriate term, according to Thomas Bodenski, chief operating officer of financial software company TS Imagine, because “we have this mindset: doing more with the same.”
Rather than hiring more knowledge workers for repetitive tasks such as filtering emails, Bodenski said, implementing a new AI-based sorting process has allowed TS Imagine to hold headcount at existing levels…
TS Imagine receives 100,000 email alerts each year, Bodenski said, and manually sorting them requires 4,000 hours of work—roughly equivalent to 2½ full-time workers.
AI can do the work at 3% of the cost of the employees, he said.
As you’d imagine, when AI enables corporate managers to achieve the same output at just 3% of the human workforce cost, people lose jobs and companies get rich.
Here’s Galloway:
Recent financial news features two stories: layoffs and record profits. These are related.
As one illustration, look at Amazon
Here’s Domusweb (a digital newspaper) to establish context:
Amazon.com Inc. is the second largest employer in the world, with 1.5 million employees.
Compared to its 2021 peak, however, it has seen a reduction of more than 100,000 employees in parallel with the expansion of its robotic fleet, which grew from 200,000 machines in 2019 to 520,000 in 2022, and now stands at 750,000.
Tying in “record profits,” let’s jump to Fortune from last month:
After posting a record-breaking $20 billion in profits during the fourth quarter of 2024 alone, almost double its $10.6 billion from the same quarter the prior year, Amazon is once again looking like the version of itself that many of its rivals should fear…
[Amazon CEO Andy Jassy] told analysts on an earnings call Thursday that Amazon will spend around $100 billion or more on capital expenses in 2025, up at least 20% from 2024.
The “vast majority” of this year’s capex will go toward supporting Amazon’s broad and deep investments into artificial intelligence infrastructure as the tech giant competes for what Jassy called “probably the biggest technology shift and opportunity since the internet.”
Earlier this week, legendary investor Louis Navellier weighed in on this shift, speaking directly about Amazon
For newer Digest readers, Louis is one of the most respected analysts in our industry. His ability to see what’s coming – and get his subscribers there ahead of time – has helped him amass one of the most envied newsletter performance-records in our business.
Here’s Louis:
Amazon is building out fully autonomous warehouses… it’s working to automate the delivery process with self-driving vans and delivery drones… and 30% of its “workforce” are already robots.
So, let me ask you this: How much longer until Amazon decides these robots are ready to take on the full workload of its 1.5 million remaining workers?
And what do you think will happen when 1.5 million hardworking Americans are suddenly out of a job?
I don’t like it when people lose their jobs, folks. But the reality is that this is happening whether we like it or not.
In this new world, there will be two kinds of companies:
- Those that master AI and employ fewer and fewer people while generating huge amounts of revenue.
- Those that go out of business.
And let’s be clear, this isn’t limited to struggling companies using AI as a lifeline to right the ship and return to profitability.
Most of the companies incorporating AI today are profitable. But AI can help them become even more profitable.
Here’s Forbes making this point in an article highlighting corporate job cuts:
Michael Ryan, a financial advisor, says that AI is a big driver in the [job cut] announcements…
“It’s not like these companies are struggling to stay afloat. They’re making these cuts while their bottom lines look good.
“I think what we’re seeing isn’t just a normal economic hiccup. It feels more like companies are using this moment to fundamentally reshape how they operate.
“They’re thinking, ‘Well, if we can replace these positions with automation, why wouldn’t we?’”
AI is going to widen today’s wealth gap
Yesterday, I highlighted the “Technochasm.” This is the term our global macro expert Eric Fry coined to describe the stark – and expanding – wealth gap in the United States that, in large part, has been driven by technology.
Louis has come to the same conclusion:
As more and more companies make these changes, a chasm is opening up.
On one side are the companies leveraging AI to unlock efficiency and boost profitability. This will allow some companies to cement their market leadership, while others will use it to supplant the current king of the hill.
On the other side of the divide will be those that fail to adapt. They will stagnate – or even collapse – under the weight of increased competition.
The reality is there is a shift ripping through the economy, and this split is going to create a vast chasm between the haves and have-nots.
Tomorrow morning at 10 a.m. Eastern, Louis, Eric, and our technology expert Luke Lango are holding an important roundtable discussion focused on this chasm.
They’ll discuss how to make sure you’re an investment “have” as AI continues to widen the gap between the “haves” and “have nots.”
Together, they have identified a small group of companies that appear best positioned to leverage AI to increase their bottom lines (and by extension, stock prices) – regardless of whether corporate managers admit that’s what’s happening or keep their “corporate Ozempic” hush hush.
Here’s more from Louis on tomorrow’s event:
During this broadcast, we will:
- Show you three critical steps you must take now to stay on the right side of the Technochasm,
- Share where the big money will be made in AI moving forward,
- Explain how the Trump administration just kicked off a modern-day Manhattan project… and why it could lead to US dominance,
- Detail why the AI Revolution has yet to deliver its biggest stock market winners,
- And so much more…
Essentially, we will give you the blueprint you need to follow if you want to make the most money possible in this next chapter of the Technochasm.
To reserve your seat, click here (the click will immediately register/sign you up).
Wrapping up…
Let’s bring today’s Digest full circle to those corporate buzzwords that are camouflaging what’s happening in the labor force.
If you’re a regular market-watcher, you know that Palantir has been one of the best-performing stocks over the last two years. While the S&P has climbed 39% over this period, Palantir has exploded more than 1,000%.
With that background, here’s the WSJ:
At Palantir Technologies, which sells data-analytics software to businesses and governments, AI has already reduced future headcount by 10% to 15%, according to Chief Information Officer Jim Siders.
Speaking at The Wall Street Journal’s CIO Network Summit event in October, Siders said “headcount avoidance” and associated savings enabled Palantir to invest in “the next round of experimentation.”
The Technochasm widens…
Have a good evening,
Jeff Remsburg
