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Artificial intelligence blamed for 500 job cuts at Dropbox

Pedestrian passes the Employment Development Department's office at 745 Franklin St. in San Francisco on March 8, 2023. | Michaela Vatcheva for The Standard

Layoffs continue to batter the Bay Area, as two San Francisco-based companies announced plans to cut hundreds of workers on Thursday—with one blaming the cuts on artificial intelligence.

Dropbox, a cloud storage company based in San Francisco, will lay off roughly 500 employees, or 16% of its workforce, according to a company memo. Founder and CEO Drew Houston said Dropbox's restructuring was spurred on by worsening economic conditions and major technological developments.

In other words, artificial intelligence might just be taking your job.

"Our next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development,” Houston said. “We’ve believed for many years that AI will give us new superpowers and completely transform knowledge work."

OpenAI logo is displayed on a phone screen and ChatGPT website displayed on a laptop screen. | Jakub Porzycki/NurPhoto via Getty Images

Houston indicated affected employees may be shifted onto other teams, but noted that the company's future growth would hinge on Dropbox's ability to leverage AI products. It is unclear whether Dropbox will be hiring workers focusing on AI in the future.

"The opportunity in front of us is greater than ever, but so is our need to act with urgency to seize it," Houston said. "Over the last few months, AI has captured the world’s collective imagination, expanding the potential market for our next generation of AI-powered products more rapidly than any of us could have anticipated."

AI-based generative technologies are booming in the Bay Area investing scene, largely driven by the growing popularity of image generators like DALL-E and language models like ChatGPT.

Data from venture firm NFX shows that San Francisco is the financial powerhouse of the AI craze, both drawing workers to the fledgling industry and transforming how tech companies approach knowledge work and restructuring.

Empty office space is seen in Downtown San Francisco. | Camille Cohen/The Standard | Source: Camille Cohen/The Standard

The Steady March of Layoffs Continues

Clothing retailer The Gap Inc.—also based in San Francisco—will also cut roughly 1,800 workers in a major restructuring effort designed to slash costs and streamline decision-making processes.

Gap's layoffs will primarily affect workers based in San Francisco, as well as the company's "upper field workforce," according to a regulatory filing submitted earlier this week.

These announcements mark the second round of layoffs both Dropbox and The Gap have carried out since the pandemic started. Dropbox last laid off 11% of its workforce in 2021, while The Gap let go of 500 employees in September last year.

"The company announced it planned to take actions to further simplify and optimize its operating model and structure, including actions such as increasing spans of control and decreasing management layers to improve quality and speed of decision making," Gap spokespeople wrote in a regulatory filing.

Boxes are piled up in front of Gap located at 2159 Chestnut St. in San Francisco on Sept. 25, 2022. | Samantha Laurey for The Standard

READ MORE: The Gap, One of San Francisco’s Most Iconic Businesses, Has Come Undone

Other local companies have announced sweeping layoffs.

San Francisco rideshare company Lyft announced it would "significantly reduce" the size of its team through layoffs, according to a Friday blog post from new CEO David Risher. Some tech companies that previously dodged layoffs have now implemented cost-cutting measures including headcount reductions.

Dropbox and Gap did not respond immediately to our requests for comment.

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