TECHNOLOGY

Microsoft cuts 10,000, Google cuts 12,000, and Microsoft makes its OpenAI bet official, all in one week

The two companies that will decide what search looks like this year shed staff on Wednesday and Friday. On Monday, one of them wrote a very large cheque.

Satya Nadella told Microsoft employees on January 18 that the company would eliminate 10,000 jobs by the end of March, a little under 5 percent of its workforce, and take a $1.2 billion charge. Customers were "optimising their digital spend to do more with less," he wrote, and the company would "align our cost structure with our revenue." Two days later Sundar Pichai told Alphabet's staff that 12,000 of them, about 6 percent, would go, the largest cut in the company's history. Some found out from a locked laptop before the email arrived.

The memos read as if drafted from the same template as Amazon's and Salesforce's a fortnight earlier: rapid pandemic hiring, a different economic reality, responsibility taken at the top. Between them the four companies have now announced more than 50,000 cuts in January. Spotify added 600 on January 23. Layoffs.fyi's running count for the month passed 60,000, more than a third of the whole of 2022.

Then on Monday, January 23, Microsoft announced what Semafor had reported two weeks earlier: a "multiyear, multibillion dollar" investment in OpenAI, the third since 2019. The company did not confirm the widely reported figure of $10 billion. Nadella framed it as the next phase of a partnership in which Azure remains OpenAI's exclusive cloud and Microsoft deploys the models "across our consumer and enterprise products." OpenAI's chief executive, Sam Altman, said the partnership let the company continue its "independent research" toward AI that benefits everyone; the company remains, on paper, a capped-profit entity governed by a non-profit.

The juxtaposition was the story. On the same week that it removed ten thousand people, Microsoft committed something like a sixth of its annual free cash flow to a 375-person research company whose main product had existed for eight weeks. Alphabet, which invented the transformer architecture that OpenAI's models are built on and has held its own chatbot back from the public, cut twelve thousand and said in the same memo that its early investments in AI were a reason for confidence about "the huge opportunity in front of us."

Wall Street rewarded both; each stock ended the fortnight higher than it began it. Investors have been asking for margin since the summer, and margin is what they got. Whether a search engine that answers in sentences is a bigger business than one that lists ten blue links, nobody yet knows, including the two companies. But it is now clear which of them intends to find out first.

INDIA

A short-seller's report wipes $50 billion off the Adani group in four days

Hindenburg Research called it "the largest con in corporate history." The group called the report "a calculated attack on India" and pressed on with a $2.5 billion share sale.

Hindenburg Research, a New York short-seller with a record of taking down electric-truck makers and Chinese lenders, published a report on January 24 accusing the Adani Group of "brazen stock manipulation and accounting fraud" over decades, of running an undisclosed web of offshore shell companies through the chairman's brother, and of loading its listed companies with debt while their shares traded at valuations it called "sky-high." The report was two years in the making and 32,000 words long. It arrived three days before Adani Enterprises, the group's flagship, opened a follow-on share sale intended to raise 20,000 crore rupees, about $2.5 billion.

By the close of trading on Friday, January 27, the group's seven listed companies had lost roughly $48 billion in market value. Adani Enterprises fell nearly 20 percent on Friday alone, below the floor price of the offer. Life Insurance Corporation of India, the state insurer, and State Bank of India, the largest lender, were named as holders of the group's shares and debt, and their shares fell too. Gautam Adani, who began the year as the third-richest person in the world, ended the week outside the top five.

On Sunday night the group published a 413-page reply. It called the report "not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India." It said 65 of Hindenburg's 88 questions had already been answered in public filings and accused the short-seller of profiting from the fall. Hindenburg replied within hours that fraud "cannot be obfuscated by nationalism." The share sale continues this week. The group has built ports, airports, power plants, roads and a large part of India's private infrastructure over the past decade, and its debt is held across the Indian banking system, which is why what happens next is not only a story about one company.

UKRAINE

Berlin and Washington agree to send tanks

After weeks of public pressure from Kyiv and Warsaw and private argument between Berlin and Washington, Germany said on January 25 that it would send 14 Leopard 2 tanks to Ukraine and allow other countries to send theirs, and the United States said it would supply 31 M1 Abrams. Chancellor Olaf Scholz had insisted he would not move without the Americans; the Americans had said the Abrams was too complex to be useful. Both positions dissolved on the same morning. Poland, Finland, Spain and others have Leopards ready; the Abrams will take months. Russia's ambassador in Berlin said the decision took the conflict "to a new level of confrontation."

MEMPHIS

The Tyre Nichols video

The city of Memphis released body-camera and pole-camera footage on the evening of January 27 showing five police officers beating Tyre Nichols, a 29-year-old FedEx worker, after a traffic stop on January 7. He died in hospital three days later. The five officers, all of them Black, were dismissed and, on January 26, charged with second-degree murder. The unit they belonged to, called SCORPION, was disbanded the next day. Protests in Memphis and other cities were largely peaceful. Nichols's mother asked that they stay that way.

CALIFORNIA

Two mass shootings in three days

A gunman killed 11 people at a dance studio in Monterey Park, a largely Asian-American suburb of Los Angeles, on the night of January 21, the eve of Lunar New Year, and shot himself the next day as police closed in. On January 23 a farm worker shot and killed seven people at two mushroom farms in Half Moon Bay, south of San Francisco. Both shooters were in their sixties and seventies. California has the strictest gun laws in the country.

ANTITRUST

Justice Department sues to break up Google's advertising business

The Department of Justice and eight states filed suit against Google on January 24, alleging that it has monopolised the technology that places display advertising across the web, and asking a court to force it to sell its ad exchange. It is the second federal antitrust case against the company in three years and the first to seek a break-up. Google said the government was "doubling down on a flawed argument."

ECONOMY

The US hits its debt ceiling; growth holds at 2.9 percent

The Treasury reached the statutory borrowing limit of $31.4 trillion on January 19 and began what Secretary Janet Yellen called "extraordinary measures" to keep paying the government's bills, which she said would last until early June. House Republicans want spending cuts in exchange for raising the limit; the White House says it will not negotiate. Separately, the economy grew at an annual rate of 2.9 percent in the fourth quarter, the Commerce Department said on January 26, slower than the third but well clear of recession.

IN BRIEF

Ardern resigns; Pakistan goes dark; the clock moves; Netflix changes hands at the top

Jacinda Ardern announced on January 19 that she would step down as New Zealand's prime minister, saying she "no longer had enough in the tank"; Chris Hipkins succeeded her on January 25. Nearly all of Pakistan lost power for most of January 23 after a frequency failure cascaded across the national grid, the second such collapse in three months. The Bulletin of the Atomic Scientists moved the Doomsday Clock to 90 seconds to midnight on January 24, the closest it has been, citing the war in Ukraine. Reed Hastings stepped aside as Netflix's co-chief executive on January 19 after 25 years, becoming executive chairman; the company added 7.7 million subscribers in the quarter and said its password-sharing crackdown would begin within weeks. In India, the government ordered YouTube and Twitter to block links to a BBC documentary on the prime minister's role in the 2002 Gujarat riots; students screened it on campuses anyway.

The Column

The week Big Tech stopped being the safe job

Fifty thousand people in a month. Every one of them was told, on the way in, that they had made the sensible choice.

By Meera Anand

A junior developer on my team asked me last year whether she should leave for a product company. Not any particular one; the category. The reasoning was the reasoning everyone in Bengaluru has heard: services is a treadmill, product is where the equity and the stability are, the big American names do not lay people off, and if you get in you are set. I told her the honest thing, which is that she should go if the work was better and not because it was safer, because nothing is safe. I am not sure she believed me. This month made the argument for me, and I take no pleasure in it.

Microsoft, Alphabet, Amazon and Salesforce have removed more than fifty thousand people in January. Add Meta and Twitter from the autumn and the number is well past sixty. Every one of those companies is profitable. Alphabet made about sixty billion dollars last year. This is not a collapse; it is a decision. Money got expensive, investors changed what they wanted, and the largest employers in software did the arithmetic that any of my clients would do and reached the same answer, only later and at greater scale.

Three things are worth saying to the people who work around these companies, which is most of the people I know.

The first is that the story about safety was always a story about interest rates. For a decade, capital was free and growth was the only number that mattered, so companies hired ahead of the work and called it investing in talent. That was true of the giants and it was true of the four-hundred-person Salesforce consultancy down the road. Free money is over. The version of "safe" that depended on it is over with it. What is left is the older version, which is being useful to an operation that has to run regardless. Warehouses, hospitals, houses, banks. Those still need their systems to work in a downturn, and in my experience they need them to work more, because there are fewer people to paper over the gaps.

The second is that the same week produced the largest single AI investment ever made. Microsoft is not confused. It cut ten thousand roles and put ten billion dollars into a company that has fewer than four hundred employees, in the same seven days, and both were the same decision: move money from where the return is falling to where it might be rising. If you are a person deciding what to learn this year, that is the only signal in the noise. Nobody in Redmond or Mountain View is going to stop hiring for the thing they just declared their biggest opportunity.

The third is for the people in Bengaluru specifically. Our industry sold itself for thirty years on being cheaper. It then spent five years, during the boom, becoming less cheap, because it could. That window is closing. The pitch that survives is not "we cost less" and it is not "we have a thousand certified engineers." It is "we understand how your operation actually works, and we can make the software match it, and we can do it in a quarter." That was always the valuable part. It is about to be the only part, because the chatbot that Microsoft just paid for is going to write the boilerplate.

I do not know whether my colleague went. If she did, I hope it was for the work. If she is reading this on a locked laptop, waiting for the email, then the advice is the same as it was: go where you are useful. That has never once been the wrong answer, and it is the only one that survives a rate cycle.

The Ledger

Microsoft's OpenAI investment is now official, "multiyear, multibillion," reported at $10 billion. Google cites its "early investments in AI" in the same memo that cut 12,000 jobs. No consumer product from Google yet.

Data centers & power

Pakistan's grid collapsed nationwide for a day on January 23, its second such failure since October. A reminder, unrelated to AI, that the constraint under all software is a wire.

Rates

Fourth-quarter US growth 2.9 percent annualised; the debt-ceiling clock started on January 19 and runs to about June. The Fed meets this week; a quarter point is expected.

Real estate

Freddie Mac's 30-year rate 6.13 percent (January 26), fourth weekly decline in five. Existing-home sales for 2022 came in at 5.03 million, the lowest since 2014, the Realtors said on January 20.

India tech

The Adani rout is a finance story, but the group owns data-centre and infrastructure ambitions and its debt runs through the banks that fund everyone else. Watch the follow-on offer this week.

What we called wrong

Two issues ago we described Google's "code red" as a product story. It was, but the first visible response was a headcount story. We should have expected the cost cut before the product.

The Back Page

Twenty-two

Novak Djokovic won the Australian Open on January 29, beating Stefanos Tsitsipas in straight sets for his tenth title in Melbourne and his twenty-second Grand Slam, level with Rafael Nadal for the most by a man. He played the tournament with a torn hamstring, by his account, and had been deported from the same country twelve months earlier over his vaccination status. He climbed into his box afterwards and wept. He is 35 and did not drop a set after the second round.