AI may already be shrinking entry-level jobs in tech, new research suggests

A SignalFire analysis of hiring trends indicates that tech companies, particularly large firms, have significantly reduced recruitment of recent college graduates in 2024, with big tech decreasing such hiring by 25% compared to 2023, while simultaneously increasing hiring of experienced professionals by 27%; this shift is attributed to the increasing capabilities of AI in automating entry-level tasks, making some roles obsolete. Gabe Stengel, founder of AI financial analyst startup Rogo, stated his AI tool can perform almost all the work he did as an investment banking analyst, and while large investment banks haven't explicitly cut analyst hiring yet, some have considered reducing junior staff hires due to AI's impact.

Analysis

Recent data from SignalFire indicates a significant shift in hiring practices within the technology sector, potentially signaling the early impact of Artificial Intelligence on labor demand. In 2024, big tech companies reduced new graduate hiring by 25% compared to 2023, while startups saw an 11% decrease. Conversely, these same big tech firms increased hiring for professionals with two to five years of experience by 27%, and startups by 14%. This trend is attributed by SignalFire's head of research, Asher Bantock, to AI's increasing capability to automate routine, low-risk tasks typically performed in entry-level positions, a view supported by a World Economic Forum survey where 40% of employers expressed intent to cut staff where AI can automate tasks. Gabe Stengel, founder of AI financial analyst startup Rogo, stated his firm's AI can perform most tasks he previously undertook as an investment banking analyst at Lazard. While large investment banks like Goldman Sachs and Morgan Stanley have not yet explicitly reduced analyst hiring due to AI, they have reportedly considered cutting junior staff hires by up to two-thirds, highlighting the perceived potential for AI to reshape even highly skilled entry-level roles. This evolving landscape creates a challenging paradox for new graduates, where obtaining entry-level experience becomes more difficult due to automation, yet experience remains crucial for employment.

Key Decisions for Investors

• Investors should scrutinize companies, particularly in tech and finance, for their reliance on entry-level roles and assess their strategies for integrating AI, as this could significantly impact labor costs and productivity.
• Monitor ongoing hiring data for new graduates versus experienced professionals, as persistent trends identified by SignalFire could indicate structural shifts in the labor market with broader economic implications and affect human capital-intensive industries.
• Consider the growth potential of companies developing and deploying AI automation tools, while also evaluating the long-term valuation impact on firms like Goldman Sachs (GS) and Morgan Stanley (MS) should they implement significant AI-driven reductions in junior staffing.