AI Is Already Causing Layoffs... And Not Just in Big Tech

Programmers everywhere are seeing a worrying trend...

Since early 2023, some of the biggest names in artificial intelligence ("AI") have been firing people.

Microsoft, Google, Amazon, Salesforce, and many other market leaders have been letting people go – and it's not for lack of work.

The AI explosion has made companies rethink where they need staff. As they cut spending in non-AI departments, they're letting people go. On top of that, they're also finding that AI advances are letting them get by with fewer workers.

The days are gone when programmers at Big Tech companies would brag about only doing 5 to 10 hours of work a week.

As we'll cover today, though, it's not just the Big Tech powerhouses. Other companies are catching on to the potential of these efficiency gains... which means we'll see more layoffs to come.

Just last week, Intuit (INTU) announced it was cutting 10% of its workforce...

However, the financial-software maker – with popular brands like TurboTax, QuickBooks, and Credit Karma – isn't a struggling business. Far from it.

In a letter to employees, CEO Sasan Goodarzi said that while the layoffs had targeted low performers at the company, the staffing changes happened for a bigger reason.

Goodarzi wants engineers, product staff, and sales staff that can help the company ramp up its AI offerings. He let go of 1,800 people, and he's planning on hiring a similar number back... but in new AI-related roles.

Intuit is doing just fine financially. It beat earnings expectations by 50 cents last quarter, coming in at $9.88 in earnings per share. And it comfortably beat revenue estimates, too.

Year-over-year revenue growth was 12% in the last 12 months, and operating earnings has grown by 22%. Pretty much every metric is looking up for Intuit.

And now, it's hoping to keep up that impressive growth by investing in AI.

The market is betting that Intuit's moves will not only maintain growth, but also boost profits in a big way...

We can see what the market believes is ahead for Intuit using our Embedded Expectations Analysis ("EEA") framework.

The EEA starts by looking at a company's current stock price. From there, we can calculate what the market expects from future cash flows. We then compare that with our own cash-flow projections.

In short, this tells us how well a company has to perform in the future to be worth what the market is paying for it today.

Intuit has been doing a great job reinvesting in its business the past two years. It grew assets at a double-digit rate in both 2022 and 2023.

At the same time, Uniform return on assets ("ROA"), a metric of the company's profitability, got a bump from growing demand. It soared to more than 55% in both years. That's up from mid-30% levels in the past.

The market thinks Intuit can keep up that growth. It expects that Intuit's AI bets will allow the company to keep growing by double digits each year.

That's not all, though. The market also thinks Intuit can see its already impressive 55% Uniform ROA soar to almost 70% over the next few years...

Now, this might seem farfetched. Surely Intuit isn't going to hit those kinds of returns if it's replacing those 1,800 employees with new employees, new bonus plans, and new stock-option packages.

However, it looks like the market thinks Intuit knows that. Like some of the Big Tech giants, Intuit isn't only going to find ways to build AI products for its clients... It's also going to use AI for its own benefit.

While 70% Uniform ROA might be a tough goal to hit, it's possible. And efficiency gains should lead this company to impressive growth for years to come.

Intuit isn't the only business catching on to how AI can both boost revenue and save costs...

We're in the early innings of the AI boom. That goes far beyond what Nvidia, Microsoft, Alphabet, and some of the other biggest "AI darlings" are doing.

This change is coming fast. It's already creating big changes across the economy – from jobs, to products, to entire industries.

And behind the AI revolution is a single, dramatic event that's set to shake up the entire stock market (and completely blindside investors)...

That's why tomorrow at 1 p.m. Eastern time, I'm hosting an "AI Panic Summit." I'll reveal the AI bombshell no one is talking about... and the No. 1 step you need to take with your money today. Click here to RSVP to this online discussion for free.

Be sure to turn up a few minutes early. For the sake of your long-term wealth, this is something you won't want to miss.

Regards,

Joel Litman
July 17, 2024