Jack Dorsey, known for his roles as a social media pioneer and cryptocurrency advocate, has now positioned himself as an AI-driven cost-cutter. On Thursday, Dorsey announced plans to eliminate 40% of the workforce at fintech firm Block—approximately 4,000 employees—citing artificial intelligence as the primary reason. In a letter to shareholders, he explained, "The core idea is simple: intelligent tools have fundamentally changed what it means to build and run a company."
As the former CEO of Twitter, Dorsey has never been celebrated for his management skills. While Block may indeed have had excess staff, critics argue Dorsey could be using AI as a pretext for layoffs. Nevertheless, market response has been telling. Dorsey’s statement confirms the worst fears of AI skeptics, likely intensifying political debates over AI’s societal impact and potentially backfiring on the tech sector—particularly in areas like data center approvals, where communities nationwide are already resisting new projects due to concerns over rising energy costs and environmental harm. If companies primarily deploy AI to cut jobs, public support for the technology could collapse. Dorsey bluntly predicted, "Within the next year, I believe most companies will reach the same conclusion and make similar structural changes."
Wall Street’s reaction to Dorsey’s move was striking. Block’s stock, which had been sluggish for months, surged 24% in after-hours trading. Investors appeared optimistic about the profit boost from cutting nearly half the workforce, yet this also highlighted the market’s conflicted stance on AI. On the same day, NVIDIA shares fell 5.5%—despite the AI chip giant having just reported another stellar quarterly earnings report the day before, with even stronger growth projected for the April quarter. Although NVIDIA has been the biggest beneficiary of the AI boom (the very trend enabling Block’s layoffs), its stock has stagnated at roughly the same level for about five months.
How to explain this divergence? While some market observers attributed NVIDIA’s decline to options-related trading rather than fundamental issues, the stock has sold off after each of its last two earnings reports. This lends credibility to concerns over whether NVIDIA’s explosive revenue growth can be sustained. In a Thursday report, Morgan Stanley noted that some investors worry the massive spending by large cloud providers on data center chips “continues to raise sustainability questions.” As discussed in today’s article, these companies have strong cash reserves and borrowing capacity, so the only plausible threat to sustainability would be doubts about corporate and consumer demand for AI services. If AI is perceived as ineffective or too expensive, demand could slow.
But Dorsey’s announcement suggests the opposite may be true. Of course, if half the workforce loses their jobs, how many consumers will be able to afford AI services remains an open question.
Netflix Makes the Right Call Thankfully, on Thursday afternoon Netflix withdrew from the bidding for Warner Bros. Discovery shortly after WBD announced that a new offer from Paramount Skydance, backed by the Ellison family, was superior to its existing arrangement with Netflix.
WBD had given Netflix four days to respond, but the streaming giant did not wait. Netflix stated that the cost required to match Paramount’s offer meant the deal “no longer made financial sense.”
Netflix investors welcomed the decision, sending its stock up 10% in after-hours trading. Over recent months, Netflix shares had fallen 39% amid growing concerns over its proposed $72 billion acquisition of WBD’s streaming assets and film studios. Had it proceeded, the deal would have forced Netflix to take on more than $50 billion in debt and face intense regulatory scrutiny and opposition from Hollywood.
Whether Paramount’s acquisition of WBD will gain regulatory approval remains uncertain, though the Ellison family’s close ties to former President Donald Trump may improve its odds. Even if successful, integrating WBD would be a monumental task. Paramount is paying a premium for a declining business—WBD reported on Thursday that fourth-quarter revenue fell 7%, with EBITDA plunging 20%.
Other News The Office of the Comptroller of the Currency, which oversees stablecoin issuers such as Circle, Paxos, and Stripe’s Bridge, is proposing new rules that would prohibit crypto platforms from passing on interest earned from stablecoin reserves to users. If implemented, the proposal would deal a significant blow to the crypto industry, which is expected to push back vigorously.
CoreWeave more than doubled its sales in the fourth quarter, but its losses exceeded expectations, causing its stock to drop over 8% in after-hours trading.
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