Being laid off due to AI efficiency savings is a fear held by many workers, with over 40% claiming to be dealing with some form of AI-induced anxiety in 2026, according to Mercer research. But it may be that AI isn't as big a cause of layoffs and redundancies as the companies enacting them might claim, and even when they are, it might be too much and far too soon, according to multiple sources of research collated by Sherwood.
Big layoffs, big claims
Over the past year, many tech companies have announced large, sweeping layoffs. By the middle of 2025, there were over 100,000 reported tech-industry redundancies, driven by large-scale layoffs at companies like Intel and Microsoft. Even when not explicitly stated, many of those affected felt it was because of companies pivoting towards AI investment and development, or because those companies were hoping to make major efficiency and performance savings by using AI to take over some roles.
In total, Challenger data suggests over 1.2 million employees were let go in 2025, marking the highest rate of job cuts since 2020. Many of these were led by government redundancies, particularly with regards to the short-lived DOGE initiative headed by Elon Musk.
Of that larger total, firms specifically cited AI as the reason for them in around 55,000 cases, with Challenger reporting around 72,000 AI-related job losses since 2023. There was over a 1,100% increase year-on-year in 2025, which suggests an enormous swing in that direction and perhaps indeed, a genuine trend that AI is replacing workers.
But not so fast, because new reports suggest some of these employers may be using AI as an excuse to cover for underperforming businesses. This "AI-washing" may be a convenient excuse to cut expenses in a way that, to investors, sounds like more of a positive development than it might otherwise be.
False alarm?
This trend was first called out by research from LSE in the first-half of 2025, which found that many companies within the agriculture industry were claiming to use AI, but weren't at all. Even the ones that did were often augmenting humans with AI rather than replacing them with it, and yet it didn't stop them from talking up their AI use to seem more innovative than it actually was.
CNBC made similar claims in November last year, citing tariff and trade uncertainties, as well as a turbulent economy overall, as more likely reasons for layoffs than the AI-inspired layoff claims made by many of the companies behind them.
In January this year, Forrester put out a report suggesting that, despite the grandiose claims by AI developers, it estimates only 6% of US jobs will be automated by 2030, suggesting that widespread AI job replacement is extremely unlikely. Indeed, it even projects that the majority of job layoffs attributed to AI so far and in the near future are likely to be reversed as companies realise the challenges of effectively implementing AI.
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