Why Jim Cramer is not ready to blame AI for this year's Microsoft's layoffs

CNBC

5 days ago

Microsoft on Wednesday announced its biggest round of layoffs this year — aimed at driving efficiencies and taking advantage of new technologies. Jim Cramer is not ready to blame AI for the job cuts. The software giant said it plans to reduce its global workforce by less than 4%, which translates to about 9,000 positions. It announced hundreds of job cuts in June and more than 6,000 in May . Roughly 1% of its workforce was eliminated in January based on performance. "The typical interview we have is how much of these layoffs are AI?" Jim noted on " Squawk on the Street " as the news was breaking. But he stressed that the real reasons for Microsoft's layoffs and others are that many companies have "too many people and they're trying to make the quarter." Microsoft did not directly explain its latest round of cuts, but a spokesperson told CNBC tech reporter Steve Kovach the tech giant continues to "implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace." Kovach reported that Microsoft employees will be spending more time focusing on meaningful work by leveraging new technologies and capabilities. Kovach said that sentiment could be a reference to artificial intelligence or Copilot, the company's digital AI-powered assistant. D.A. Davison analyst Gil Luria said Microsoft is certainly trying to control costs. But he added that increases in productivity from the use of AI tools do put the company in a good position to comfortably make large job cuts in a short period. "Microsoft is managing its costs very carefully right now in order to balance investment with continued margin growth. The huge investment in data center capital expenditures is putting pressure on margins, and Microsoft has been able to offset that pressure by holding down personnel growth." Luria also told CNBC that "fortunately for Microsoft, they have been able to leverage new AI tools to increase productivity enough to be able to achieve higher output with less employees." On Wednesday, D.A. Davidson raised its Microsoft price target to $600 per share from $500 — implying 22% upside to Tuesday's close of $492, which was just shy of the stock's June 26 record-high close. Luria and his colleagues cited runway for growth in Microsoft's Azure cloud business and an expansion of its lead in AI. They were especially encouraged after an outstanding fiscal 2025 third quarter that quieted critics of its AI strategy and concerns about its fraying relationship with OpenAI. Microsoft shares have been soaring since their 52-week low of $344 on April 7 on tariff tensions. When President Donald Trump announced a pause in "reciprocal" levies two days later, Microsoft ripped 10% higher. Nearly two weeks later, shares nearly revisited those lows before climbing through the end of April, May, and June — hitting an all-time intraday high above $500 on Monday. On Tuesday evening's episode of "Mad Money," Jim included Microsoft, along with Club names Nvidia and Meta Platforms , in his newly revealed acronym, MNM. "Not FANG. Not 'Magnificent Seven.' Just M-N-Ms," Jim said on the show. There are the "sole survivors of a brutal quarter from what used to be the most captivating group in the market." (Jim Cramer's Charitable Trust is long MSFT, META, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.