Financial tech firm Block’s stock surged as much as 20% in Friday trading after its billionaire CEO Jack Dorsey revealed plans for sweeping layoffs and a full embrace of AI tools.
Dorsey, best known as the co-founder of Twitter, said Block would lay off about 40% of its employees – or more than 4,000 of its 10,000-plus workforce.
“The core thesis is simple. Intelligence tools have changed what it means to build and run a company,” Dorsey wrote in a letter to shareholders. “We’re already seeing it internally. A significantly smaller team, using the tools we’re building, can do more and do it better. And intelligence tool capabilities are compounding faster every week.”
The 49-year-old executive, whose net worth is pegged by Forbes at $5.9 billion, also predicted that more firms will follow in Block’s footsteps.
“Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes. I’d rather get there honestly and on our own terms than be forced into it reactively,” Dorsey wrote.
By the afternoon, Block shares were hovering up about 15% to $62.62 per share. Even with the gains, the stock is down about 4% since the start of the year.
The layoffs were announced alongside Block’s fourth-quarter earnings. The payments firm’s gross profit jumped to $2.87 billion, up 24% compared to the same quarter a year ago.
“For years, we have debated whether AI would dent jobs at the margin. Now we have a public case study in which the CEO explicitly says that intelligence tools have changed what it means to build and run a company,” Stephen Innes of SPI Asset Management wrote in a note.
“Other large employers have announced tens of thousands of cuts in recent months. Some have downplayed the AI link. Block did not,” he added.
Block’s announcement could further inflame concerns that AI advancements will cause major upheaval in the job market.
Earlier this week, a major selloff of tech stocks was fueled in part by a bombshell essay by Citrini Research, which speculated about a nightmare future scenario in which AI caused unemployment to spike above 10%, leading to a wave of mortgage and loan defaults.
Amazon has been laying off thousands of employees, linking the cuts to AI adoption. Last year, Salesforce laid off 4,000 workers, also attributing the move to AI.
With Post wires
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