In fact, these job cuts damage employee sentiment toward AI – which is one of the strongest predictors of firm productivity when AI is used. Laying off employees in the name of AI investment is a self-defeating strategy that offsets any expected productivity increase. We discovered a clear pattern: As the frequency of AI investment announcements rises, so too do announcements of job cuts caused by AI. So after investing heavily in AI, managers face pressure to show a strong financial return. This is in line with our earlier research that showed proclamations of AI investment don’t consistently boost a company’s share price.