AI may become a scapegoat for layoffs in 2026, investors warn

A study conducted by the Massachusetts Institute of Technology (MIT) in November found that an estimated 11.7% of jobs could already be automated using AI. While this potential for automation exists, enterprise venture capitalists report that AI will have a big impact on the enterprise workforce in 2026. Employers are already eliminating entry-level jobs because of AI technology, and companies are pointing to AI as the reason for layoffs. As adoption increases, the tension between human labor and automated software is expected to intensify.

Venture capitalists expect this shift to alter corporate budgets. Marell Evans, founder and managing partner at Exceptional Capital, reported that companies looking to increase AI spending will pull money from their pool for labor and hiring. Evans anticipated that as AI budgets increase, human labor will be cut and layoffs will continue to aggressively impact the U.S. employment rate. Rajeev Dham, managing director at Sapphire, agreed that 2026 budgets will start to shift resources from labor to AI.

Other investors point to a fundamental change in how software operates. Jason Mendel, a venture investor at Battery Ventures, reported that 2026 will be the year of agents—AI software capable of performing tasks autonomously—as software expands from making humans more productive to automating work itself. This transition represents a shift from simple labor augmentation to direct human-labor displacement. Eric Bahn, co-founder and general partner at Hustle Fund, questioned whether the automation of repetitive or logical roles will lead to more layoffs, higher productivity, or simply serve as an augmentation to make the existing labor market more productive.

However, some investors warn that workforce reductions may not always stem from actual technological integration. Antonia Dean, a partner at Black Operator Ventures, explained: “The complexity here is that many enterprises, despite how ready or not they are to successfully use AI solutions, will say that they are increasing their investments in AI to explain why they are cutting back spending in other areas or trimming workforces. In reality, AI will become the scapegoat for executives looking to cover for past mistakes.” While AI companies argue that their technology does not eliminate jobs but instead shifts workers to deep work—professional tasks requiring high concentration—while automating repetitive busy work, venture capitalists investing in the sector suggest that worker anxieties regarding automation will not be easily quieted.

Why it matters

Enterprise investors predict that in 2026, companies will increasingly use AI as a justification for layoffs and budget shifts, moving resources from human labor to AI-driven automation.