Many more tech layoffs could come in industry rightsizing, Minneapolis analyst says

Prominent Minneapolis tech analyst and investor Gene Munster expects a lot more Big Tech layoffs this year after he says those companies hired too aggressively in the past few years.

On top of the recently-announced rounds of job cuts, he thinks tech companies could still slash another 15% to 20% of their workforces in the next three months to a year.

"Ultimately, these companies still have just way too many employees," Munster said.

But it won't happen all at once, he said, noting that companies can also freeze hiring, with about 10% of their workers turning over every year through attrition.

"They'll do it slowly," he added.

Munster has closely followed Apple, Google and other big tech companies for decades. He was a longtime financial analyst at Piper Jaffray before branching off in 2017 to start a venture capital firm, Loup Ventures, with two other partners.

That firm, which became Loup Funds, rebranded this week to Deepwater Asset Management to better reflect its expanded focus in also investing in public companies. With a continued focus on tech-driven growth companies, it now has about $200 million in assets under management, Munster said.

"We love it here and want to grow a sustainable, multi-generational firm here," he said.

Currently a 10-person firm based in Minneapolis' Uptown, Munster says he hopes to add a few more employees this year with a longer-term goal of becoming a multibillion-dollar investment firm with a team of 30 to 50 people.

While overall layoffs in the U.S. remain at fairly low levels, the tech sector has been one of the few industries to see a significant downsizing in recent months, grabbing lots of headlines.

In 2022, tech companies announced about 97,000 layoffs, which was nearly a fourth of all job cuts last year, according to consulting firm Challenger, Gray & Christmas.

Google's parent Alphabet, Microsoft and Amazon are among those who have already each announced job cuts of 10,000 or more workers so far this year.

"That is a pretty remarkable growth rate — and also equally remarkable the pace that they had been hiring," he said.

Many tech companies had been confident the growth would continue, but that has obviously not been the case, Munster said.

"I think the mistake that was made is these companies just continued that breakneck hiring speed into 2022," he said. "Now they've got to start to reverse that."

Meanwhile, Munster said that Apple, which has not announced any recent layoffs, has hired at a more appropriate rate, growing its staff by about 20% during this period. That means that Apple can slow its hiring instead of having to do layoffs, he said.

As for those tech workers who have been laid off recently or who may soon find themselves out of jobs, Munster said he thinks they won't be on the job hunt for long, especially as other industries such as financial services and manufacturing are becoming more focused on tech.