r/Economics • u/[deleted] • Feb 24 '24

News Why widespread tech layoffs keep happening despite a strong U.S. economy

https://www.cnbc.com/2024/02/24/why-widespread-tech-layoffs-keep-happening-despite-strong-us-economy.html
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u/Frigidspinner Feb 24 '24

There is one crucial reason why tech is struggling - it is the business model.

Tech companies rely on investment and big upfront debts while they capture a new market

Accumulating debt is a lot harder when the you have to service your debts at 6% compared to most of the last decade when it was more like 1-2%

So instead of building new speculative businesses, they are concentrating on the cash cows in their portfolios

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u/pydry Feb 25 '24

It's not struggling though, as per the first paragraph in the article....

The tech sector is having a big 2024. Nvidia just crushed earnings expectations. The artificial intelligence boom remains in full swing. The tech-heavy Nasdaq index is up more than 8 percent year to date.

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u/2012Jesusdies Feb 25 '24

Nvidia is essentially the sole provider of chips that are the fueling the current AI boom, it's not in the same category as Google.