Zoho founder Sridhar Vembu says AI giving no gains, tech firms firing workers for no real reason

Zoho founder Sridhar Vembu has questioned the hype around artificial intelligence and asked whether AI was truly delivering real productivity gains. He also claimed that companies may be using AI to cut labour cost and impress investors. Vembu had in fact been questioning the strong hype and narrative around AI even before top AI leaders started toning down their warnings abound massive job losses due to AI.

For the last two years, the global tech leaders have kept asserting that AI would improve productivity massively, automate white-collar work and eventually replace millions of human jobs. Companies invested billions into AI infrastructure, investors poured money into startups, and business leaders repeatedly warned employees to prepare for disruption, with some even warning of an ‘apocalypse’.

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‘Companies using AI as convenient explanation for layoffs’

Over the past few weeks, Sridhar Vembu has repeatedly criticised the current AI hype on X, arguing that actual productivity gains remain limited and that companies are using AI as a convenient explanation for layoffs that are really tied to economic pressure and investor expectations.

His comments are now drawing attention online because major tech leaders, including Sam Altman, Jeff Bezos and Jensen Huang, have started changing their stance about AI replacing jobs.

Early in the month, Vembu questioned why most of the American public, including college students, have started developing negative feelings toward AI despite the technology being promoted as revolutionary.

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Vembu said companies are wrongly linking layoffs with AI progress.

“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,” he wrote on X.

Vembu argued that layoffs are more closely connected to rising costs and economic pressure rather than AI suddenly becoming capable enough to replace workers at scale.

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

‘AI investment bubble has kept US economy afloat, but not for long’

On Wednesday, Vembu warned that the economic picture globally is becoming weaker and that AI alone cannot solve all the problems.

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

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He also argued that previous technological revolutions also failed to prevent economic crises, pointing to the global financial crisis of 2008 despite the smartphone boom created by the iPhone era.

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

Vembu also questioned one of the biggest assumptions that AI tools will dramatically increase software engineering productivity.

‘Current AI boom may be biggest financial bubble yet’

Discussing AI-generated coding tools based on large language models (LLMs), Vembu said that companies are investing hundreds of billions of dollars, believing productivity could rise 10 times or more, but things are looking very different in reality.

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Many big companies across the world have been investing aggressively in AI infrastructure while also reducing their staff.

Vembu called the current AI boom an “investment bubble”, adding that large technology revolutions often create financial bubbles, but this one may be the biggest yet.