Why AI-linked layoffs aren't boosting stock prices

For years, the corporate playbook was simple: announce layoffs, cut expenses, and watch Wall Street cheer your stock higher. But if you try to slap an AI sticker on those pink slips today, investors are giving you a very different reception.

According to a CNBC analysis of 23 S&P 500 companies that tied recent workforce reductions to artificial intelligence or automation, the strategy is backfiring. As of May 15, 56% of those firms traded in the red after their layoff announcements. For the companies that dropped, the average decline was a brutal 25%.

Cutting staff, tanking shares

The losses cut across major brand names.

Nike slashed roughly 800 workers in January to speed up automation across its U.S. distribution centers. By May 15, its stock was down nearly 35% from the layoff announcement.

Salesforce cut 4,000 workers in September, explicitly pointing to its "Agentforce" customer service bots replacing support engineers. Since reports of its AI-driven cuts surfaced late last summer, the stock has dropped about 32%.

Freelance platform Fiverr took an even deeper cut in late September, slashing 30% of its workforce to become a leaner, "AI-first" company. Its stock subsequently cratered by 54%.

The reality of "AI washing"

To be fair, AI is indeed transforming payrolls. Estimates suggest over 112,000 job cuts have been tied to AI adoption since early 2025. An MIT study published in November found AI could already perform tasks covering 11.7% of the U.S. workforce, representing up to $1.2 trillion in potential wage savings.

So why aren't investors rewarding these cost cuts?

Columbia Business School associate professor Daniel Keum noted that AI productivity gains are largely a zero-sum game. If you cut staff with AI but your competitors do the exact same thing, baseline efficiency rises, yet nobody becomes structurally more profitable.

Then there is what UP.Partners partner Ally Warson calls "AI washing." Investors are growing skeptical of whether companies are legitimately restructuring around automation or simply using buzzy AI headlines to mask past over-hiring, executive missteps, or weak demand.

As AdvisorShares founder Noah Hamman put it, job cuts are simply no longer enough. The market is now scrutinizing real returns on capital expenditures, looking for genuine revenue engines like Alphabet's Gemini boosting cloud and search, rather than defensive payroll slashes.

Why it matters

This trend marks a major reality check for how the corporate world sells AI.

For business leaders, claiming an "AI transformation" while quietly firing staff is no longer a get-out-of-jail-free card. In fact, doing so now often signals to Wall Street that your core business is running out of organic growth and resorting to blunt cost-cutting. If you can't show new revenue streams to accompany automation, public markets will punish you.

For the AI industry, the bar for software vendors has shifted dramatically. Pitching tools purely on labor replacement is becoming a dangerous narrative that alienates workforces without impressing investors. The real winners will be tools that unlock net-new capabilities, like physical robotics tackling dangerous industrial inspections or generative platforms directly expanding gross margins.

We think Wall Street's skepticism here is remarkably healthy. It separates genuine technological leverage from cheap corporate smoke screens. Trimming payroll might save a quick dollar this quarter, but investors are finally realizing that an enterprise cannot shrink its way to greatness.