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Suddenly, the whole world outside China is in a tizzy about DeepSeek. The Chinese artificial intelligence (AI) developer offers no apparent answer to China’s lag in advanced semiconductor technologies but seems to come with more efficient software, an area where there is no obvious reason why China should be at a major disadvantage to the US. After being held responsible for a plunge in US share prices on January 27, including a 17% drop in Nvidia’s stock, it is now concentrating American minds on the mission to beat China in the race to artificial general intelligence (so-called AGI) and render humanity obsolete. In the meantime, the bosses of AT&T and Verizon are doing as much as they can without it.
AT&T CEO John Stankey, who sounds chuffed about the emergence of a lower-cost AI, has made layoffs his forte since taking over management of the giant US telco in July 2020. Fattened by its disastrous takeover of TV company Time Warner in 2018, AT&T five years ago had roughly 230,000 employees and annual revenues of about $172 billion. Both figures have subsequently fallen, but headcount has come down at a much sharper rate. Data published this week, after AT&T reported full-year sales of $122.3 billion, shows another 9,500 jobs were cut in 2024, lowering the total to 141,000. Back in 2017, including the Time Warner business it was then trying to buy, AT&T had as many as 280,000.
Cuts at Verizon have also been dramatic, if not quite on the AT&T scale. Run by Hans Vestberg, who relinquished Ericsson’s technological lead to China’s Huawei before joining the AT&T rival, it has managed to grow sales while axing jobs. Annual revenues at the company rose by $6.5 billion between 2020 and 2024, to about $134.8 billion, just as 32,600 jobs were slashed over this period. Workforce shrinkage left Verizon with fewer than 100,000 employees at the end of 2024.
Sharpening the axe
In the absence of sparkling new ideas for telco sales growth, Stankey and Vestberg have made cost cutting a priority. But it would be wrong to attribute most of the attendant layoffs so far to the impact of AI. Stankey quickly realized that managing a creative outfit like Time Warner was not for him and parked the whole WarnerMedia business, as it had by then been renamed, in a joint venture with Discovery. Some 30,000 positions were instantly erased from the main AT&T books when this happened in 2022.
Both telcos have also benefited from a customer preference for shopping online rather than visiting a high-street store. Outside this retail environment, telcos have undoubtedly grown more heavily reliant on external contractors as opposed to permanent employees. But more humdrum efficiency measures, including the basic automation of some tasks, will also have helped with cuts.
Nevertheless, AI was highlighted during recent calls about financial results as something that would help to sharpen the axe. Those updates came after AT&T said in December that its latest aim was to slash another $3 billion in annual costs by the end of 2027. “In 2025, we will make progress on this goal by further integrating AI throughout our operations,” said Stankey this week.
Its impact is being felt in numerous departments. In a long-winded response to an analyst question about DeepSeek, Stankey desperately tried to present AI as something other than an outright destroyer of call center jobs, saying “it’s not that we’re necessarily exclusively replacing individuals with the technology, but we’re making them a lot more effective and efficient in how they handle customer needs and then complementing that with customer-supported AI.” AT&T has also put AI to use on writing code and adapting the capabilities of the mobile network based on analysis of traffic patterns.
At Verizon, “driving down costs in our operations” is part of a “three-pronged strategy for AI,” Vestberg told analysts. AI Connect, which should be the most exciting prong, positions AI in the same way edge computing was positioned years ago. The idea is to host the resources needed for AI applications in the network facilities that dot the US – some 16,000 “near net” enterprise locations, according to Verizon, along with between 100 and 200 acres of land partially “zoned” for data center build – and then charge for the privilege. If investors are excited by this opportunity, they are concealing it well. Verizon’s share price is down 3.4% in the last year and 31.6% in the last five.
DeepSeeking missile
The rate of job cuts was relatively low at Verizon in 2024, when fewer than 6,000 positions were eliminated, down from the nearly 12,000 that were scrapped in 2023. Yet Verizon employs about 78,000 fewer people today than it did ten years ago, and there has been no sign the trend might go into reverse. If AI does create new types of job, as apologists argue, they have clearly not swelled headcount within two of the biggest three US telcos so far.
Regardless of AI’s specific impact on jobs, the message of the last few years is that telcos can operate a business of roughly the same size with just a fraction of the workforce they previously needed. Average revenues per employee rose 6% at Verizon last year, to about $1.35 million, and have soared from less than $717,000 a decade ago. At AT&T, they grew 7% in 2024, to nearly $868,000, and are up from less than $544,000 in 2014.
Investors are in a flap about DeepSeek because it apparently needs less processing power – fewer of the Nvidia chips – than its US rivals. This calls into question the magnitude of the AI data center investments that US hyperscalers have made. But the societal concern should be that DeepSeek’s reasoning model moves AI a step closer to a higher form of intelligence. Whether AGI is achievable, humanity seems determined to find out. And to many that does not seem like a very smart thing to do.