Tech layoffs: High-growth startups are shedding jobs... again

6/9/22 7:00PM

Tech startups are cutting back‍

‍Bird, the company most famous for its electric scooters and bikes, is laying off 23% of its workforce this week according to an internal memo. With 572 employees as of the end of 2021, that suggests around 130 jobs are being cut, as the company cited macroeconomic trends and a need to reduce its cost base.

Although notable, Bird is only the latest in a long list of tech layoffs. The site Layoffs.fyi has been tracking tech startup job losses since the pandemic started, and it's starting to show a marked increase in layoffs in the last few months. In May the site tracked 16,935 jobs lost, the highest monthly reading for 24 months, only behind the ~26,000 tech startup jobs that were lost during the early months of the pandemic.

‍Funding doesn't grow on trees

‍Falling share prices can sometimes feel like an abstraction, only affecting the paper wealth of shareholders. But the tech sell-off that we've discussed at length this year was always going to filter through into real economic decisions. Startups burning cash to chase growth have been in vogue — now they couldn't be further from it. Business models that promised much once they got to a certain scale now just don't have the time to get there — and the record venture funding that was happy to bankroll that expansion has evaporated. Layoffs, unfortunately, could continue.

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EPA: xAI’s Colossus data center illegally used gas turbines without permits

The Environmental Protection Agency has ruled that xAI violated the law when it used dozens of portable gas generators for its Colossus 1 data center without air quality permits.

When xAI set out to build Colossus 1 in Memphis, Tennessee, CEO Elon Musk wanted to move with unprecedented speed, avoiding all of the red tape that could slow such a big project down.

To power the 1-gigawatt data center, Musk took advantage of a local loophole that allowed portable gas generators to be used without any permits, as long as they did not spend more than 364 days in the same spot. That allowed xAI to bring in dozens of truck-sized gas generators to quickly supply the massive amount of power the data center needed to train xAI’s Grok model.

The new EPA rule says the use of such portable generators falls under federal regulation, and the company did need air quality permits to operate the turbines. xAI is also using dozens of such generators to power its Colossus 2 data center just over the border in Alabama.

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Trump to push Big Tech to fund new power plants as AI drives up electricity costs

President Donald Trump is expected to announce a plan Friday morning that would require Big Tech companies to bid on 15-year contracts for new electricity generation capacity. The move would effectively force companies to help fund new power plants in the PJM region as soaring demand from AI data centers pushes up electricity costs across the US power grid.

Earlier this week, Trump called on tech giants to “pay their own way,” arguing that households and small businesses should not bear the cost of power infrastructure needed to support energy-hungry data centers.

Microsoft quickly responded, saying it would “pay utility rates that are high enough to cover our electricity costs,” along with committing to other changes aimed at easing pressure on the grid. Other major tech companies are expected to follow suit, though Wedbush Securities analyst Dan Ives warned the added costs could slow the pace of data center build-outs.

As we’ve noted, forcing tech companies to shoulder higher electricity costs is likely to hit some firms harder than others. Companies like Microsoft, Google, and Amazon can pass at least some of those costs on to customers by selling data center capacity downstream. Meta, in contrast, does not have a cloud business, meaning its AI ambitions lack a direct revenue stream to offset rising power costs.

So far tech stocks don’t appear to be affected much in premarket trading. However utility companies most levered to the AI boom certainly are, with Vistra, Constellation Energy, and Talen Energy deep in the red ahead of the open as analysts at Jefferies warn that these firms face risks from this plan.

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OpenAI working to build a US supply chain for its hardware plans, including robots

When OpenAI purchased Jony Ive’s I/O, it entered the hardware business. The company is currently ramping up to produce a mysterious AI-powered gadget.

But OpenAI plans on making more than just consumer gadgets — it also plans on making data center hardware, and even robots.

Bloomberg reports that OpenAI has been on the hunt for US-based suppliers for silicon and motors for robotics, as well as cooling systems for data centers.

AI companies are looking toward robots as a logical next step for finding applications for their models.

OpenAI told Bloomberg that US companies building the AI brains of robots might have an edge against the Chinese hardware manufacturers that are currently making some impressive humanoid robots.

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