Sridhar Vembu calls out AI layoffs narrative as ‘hype over reality’

As the global tech industry begins dialling back its warnings of an AI-led jobs crisis, Zoho founder Sridhar Vembu has emerged as one of the earliest and strongest voices challenging the narrative around artificial intelligence replacing workers at scale.

For nearly two years, tech companies and AI startups aggressively promoted the idea that artificial intelligence would dramatically boost productivity, automate white-collar work and eventually replace millions of jobs. Billions of dollars flowed into AI infrastructure, while executives repeatedly warned employees to prepare for sweeping disruption across industries.

But weeks before several top AI leaders softened their stance on job losses, Vembu was already questioning whether AI was delivering the productivity gains companies had promised.

In a series of posts on X over recent weeks, Vembu criticised what he described as the growing AI hype cycle, arguing that many companies are using AI as a convenient justification for layoffs that are actually driven by financial pressure and investor expectations.

One of his sharpest remarks came on May 19, when he questioned why growing sections of the American public, especially college students, are developing negative views toward AI despite the technology being marketed as revolutionary.

“It does not help that companies are blaming job losses on AI, which is both convenient and as an added bonus, makes a company look visionary,” Vembu wrote.

According to him, layoffs are more closely linked to rising operational costs and slowing economic conditions than AI suddenly becoming capable enough to replace large sections of the workforce.

“The layoffs are related to rising cost pressures,” he added.

Vembu also warned that the broader global economy is weakening and AI alone cannot solve deeper structural problems.

“The AI investment bubble has kept the US economy afloat but that can only go on for so long,” he said in another post.

Drawing parallels with earlier technology booms, Vembu argued that even transformative innovations such as the smartphone revolution failed to prevent economic crises like the 2008 global financial crash.

“AI will not magically cure global imbalances,” he wrote.

He also challenged one of the biggest assumptions driving the AI race — that artificial intelligence tools will increase software engineering productivity by massive margins.

In a May 14 post, Vembu described what he called a “developer productivity paradox.” Referring to AI coding tools powered by large language models, he said companies are investing hundreds of billions of dollars on the belief that productivity could improve 10 times or more, but actual outcomes so far remain far below expectations.

His remarks are gaining traction as companies continue spending aggressively on AI infrastructure while simultaneously cutting jobs across departments.

In another recent post, Vembu directly described the ongoing AI boom as an “investment bubble.” His comments came in response to a viral X thread alleging that major tech firms and AI startups are creating circular financial ecosystems involving investments and cloud spending.

The thread claimed companies such as Microsoft, Amazon, Google and Oracle are investing heavily in AI startups including OpenAI and Anthropic, while also generating major cloud revenue from those same firms using their infrastructure. Critics argued that the cycle is helping inflate growth projections and investor confidence despite many AI businesses still struggling to build sustainable profits.

While those claims continue to be debated online, Vembu suggested that much of the current AI economy is being driven by investment momentum rather than proven productivity gains.

Tech leaders begin changing tone on AI job fears

Vembu’s comments are drawing sharper attention now because several of the world’s biggest AI and technology leaders have recently started walking back earlier warnings about massive job losses.

OpenAI CEO Sam Altman recently admitted that his earlier fears about AI rapidly replacing entry-level white-collar jobs have not materialised as quickly as expected.

Speaking virtually at a conference hosted by Commonwealth Bank of Australia in Sydney, Altman said he had expected more jobs to disappear after the rise of ChatGPT.

“I’m delighted to be wrong about this,” Altman said.

He added that society continues to value human interaction far more than many in the tech industry initially assumed.

“I don’t think we’re going to have the kind of jobs apocalypse that some of the companies in our space advocate or talk about,” he said.

Similarly, Jeff Bezos argued in a recent CNBC interview that AI is more likely to improve worker productivity than fully replace humans.

“It’s going to be done with a bulldozer instead of a shovel,” Bezos said while describing AI-assisted work.

Meanwhile, Jensen Huang openly criticized executives who use AI as an explanation for layoffs.

“I think the narrative that connects AI to job loss for many of the CEOs that are doing it, it is just too lazy,” Huang said during an interview with Singapore broadcaster CNA.

According to Huang, some companies may simply be using AI-related messaging to justify restructuring and cost-cutting measures already underway.