99% of CEOs are planning AI layoffs in the next 2 years — and entry-level workers are facing the biggest hit

Mercer’s survey found 99% of 825 C-suite leaders expect AI to drive at least some headcount reduction over the next two years, with 98% planning organization design changes. The article highlights the greatest pressure on entry-level and junior roles, citing a rising share of CEOs looking to cut junior positions from 17% in 2025 to 43% this year. It also notes several companies, including Meta, Pinterest, Dow and Amazon, have linked recent layoffs to AI-related restructuring.

Analysis

This is less a near-term labor shock than a multi-quarter margin reset. The first-order winner is anyone selling labor substitution tools into large enterprises; the second-order losers are not just junior headcount but the ecosystems built around onboarding, training, staffing, and outsourced “process-heavy” work. That should create a wedge: software and services that capture productivity budgets can outgrow the broader IT spend pool even if overall corporate hiring slows.

The market is likely underestimating how quickly CFOs translate AI rhetoric into operating discipline. Once management teams benchmark a peer’s AI-driven headcount cuts, the behavior becomes contagious, especially in functions where output is easy to measure and quality risk is low. That favors near-term multiple expansion for firms with visible automation monetization, while pressuring companies with labor-intensive cost structures and weak pricing power.

The bigger risk is that adoption remains more about cost cutting than revenue creation. If consumer and employee usage stays shallow, the AI capex cycle can still justify itself through layoffs and workflow redesign, but that is a slower-burn story with higher political and regulatory overhang. In that scenario, AI beneficiaries outperform on incremental margin capture, but the broad tech complex may face a digestion phase as investors realize the demand side is not yet compounding at the same pace as supply-side enthusiasm.

For the named stocks, the sign is slightly different: the ad/discovery and e-commerce names are the cleaner “AI efficiency” expression, while the industrials angle is more about signaling than earnings power. For banks, the impact is more indirect—slower hiring and weaker entry-level wage growth can soften loan demand and consumer credit quality at the margin over 6-12 months, but it is not an immediate earnings event.

Key Decisions for Investors

• Long MSFT / short a labor-intensive enterprise services basket for 3-6 months; best risk/reward is in firms where AI can lift gross margin without visible revenue reacceleration.
• Buy 6-12 month call spreads on AMZN or META on pullbacks: if AI is being used to compress operating leverage, these are among the clearest beneficiaries of margin expansion; cap risk by using spreads rather than outright calls.
• Short a basket of high-headcount, workflow-heavy software/services names against long an AI infrastructure beneficiary for a 1-2 quarter pair trade; the thesis is relative operating margin divergence, not sector beta.
• Avoid chasing JPM on this headline alone; instead, consider a modest underweight to regional banks if payroll growth and entry-level hiring continue to soften over the next 2-3 quarters, which would pressure consumer credit and fee growth.