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microsoft cuts 4,800 jobs in xbox overhaul as ai spending mounts

Microsoft layoffs 2026

Microsoft announced Monday it will cut 4,800 jobs, roughly 2.1% of its global workforce, as part of a sweeping overhaul of its Xbox gaming division. The restructuring includes divesting up to five studios, a move aimed at improving returns after years of heavy spending on gaming.

The gaming division alone will lose 3,200 positions. Microsoft laid off 1,600 employees within that group on Monday, with more cuts to follow as the restructuring plays out.

Microsoft has poured tens of billions of dollars into Xbox over the past several years, including its blockbuster purchase of Activision Blizzard. Despite that investment, the company has struggled to close the gap with Sony’s PlayStation and Nintendo, a shortfall that pushed leadership toward a broader rethink of how the gaming business operates.

That rethink has already reshaped Microsoft’s strategy. The company has moved away from relying on console-exclusive titles to drive Xbox hardware sales, choosing instead to distribute its games across more platforms.

Four studios spun off, one under review

Xbox’s new head, Asha Sharma, laid out the studio changes in a note to employees. Compulsion Games, known for “South of Midnight,” and Double Fine Productions, maker of “Psychonauts,” will become independent studios. Ninja Theory and Undead Labs will be spun off to focus on growing their “Senua” and “State of Decay 3” franchises, respectively.

Arkane Studios, the developer behind “Dishonored” that is currently working on a game based on the Marvel Comics character Blade, faces a different path. Its management has started consultations with its workers union in France to review options for the studio’s future, Sharma said.

AI spending drives the push for efficiency

Big Tech companies are on pace to spend more than $700 billion on AI this year, and that spending is putting pressure on firms to demonstrate returns while managing the rising cost of deploying the technology across their operations. Amazon and Meta Platforms have both laid off thousands of employees in 2026 as they navigate similar pressures.

Microsoft’s Chief People Officer, Amy Coleman, addressed the connection between AI and the layoffs directly in a memo to staff. “The roles eliminated today are not being replaced by AI,” she wrote. “At the same time, what is true is that AI is changing how work gets done.”

Parth Talsania, CEO of Equisights Research, said the targeted nature of the cuts changes how investors are likely to read the announcement.

“That (targeted cuts) makes the announcement read more like portfolio reallocation and operating discipline than a fresh catalyst for the stock,” Talsania said. “In the near term, the market is likely to reward Microsoft less for headcount reductions and more for evidence that AI monetization is scaling faster than AI-related costs.”

Microsoft shares fell 1.4% on Monday. That decline follows a rough first half of 2026 for the stock, which dropped nearly 23% over the first six months of the year, its worst first-half performance since 2022.

A pattern of workforce reductions

This isn’t Microsoft’s first round of cuts this year. Earlier in 2026, the company offered voluntary buyouts to about 7% of its U.S. workforce, roughly 9,000 employees. Microsoft has a history of trimming its workforce near the end of its fiscal year in June, timing that lines up with its spending planning for the year ahead.

Gil Luria, managing director at D.A. Davidson, said the pattern reflects a deliberate financial strategy tied to AI investment.

“Microsoft has been managing down its workforce in order to pay for its AI investments,” Luria said. “By keeping its headcount down they have been able to accelerate revenue growth while maintaining the same margins.”

Azure growth comes with rising costs

Microsoft’s Azure cloud-computing business has benefited enormously from AI demand. Azure served as the exclusive seller of OpenAI’s models until April, a position that fueled significant growth for the division. But building the data centers needed to support that demand carries a steep price, and those costs are now squeezing Microsoft’s cash flow.

Microsoft is expected to report quarterly results later this month. In April, the company forecast Azure sales above Wall Street’s expectations, but it also projected $190 billion in spending for 2026, a figure that far exceeded what analysts had anticipated.

The company faces pressure from multiple directions beyond gaming and cloud costs. AI tools capable of automating routine business tasks are increasingly seen as a threat to Microsoft’s software business, one of its most reliable revenue sources. Meanwhile, a spike in memory chip prices, driven by data center demand, has forced Microsoft to raise Xbox console prices even as demand for the console remains soft.

The combination of factors, restructuring costs in gaming, ballooning AI infrastructure spending, and new pressure on its core software products, puts Microsoft in a position where investors are watching closely for signs that its AI bet is starting to pay off rather than simply adding to its expenses.

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Trump Renames AI “Super Intelligence” in Executive Order as Calls for Regulation Grow

By George Mensah 4 min read

President Donald Trump signed an executive order on Tuesday, Sept. 29, 2026, that renames artificial intelligence “super intelligence” across the federal government. The White House says the new term better describes what the technology can do. The order lands as critics press Washington for stricter limits on how fast AI develops.

What the order says

The executive order argues that current systems do “much more than imitate or automate discrete aspects of human intelligence.” It goes further in its central passage. “As these capabilities continue to improve, they increasingly represent not merely artificial intelligence, but a new era of Super Intelligence,” the text reads.

It adds that federal terminology “should reflect the transformative capabilities of these technologies and the limitless opportunities they create for the American people.”

Trump spoke to reporters after signing. “It’s not artificial, we all agree on that,” he said.

What agencies must do now

Every federal agency has to use the new term, or its short form “SI,” when it talks about the technology in public. That covers public communications, websites, reports and policy documents. If your local agency publishes an AI guidance page, expect it to change.

The order also gives Michael Kratsios, director of the Office of Science and Technology Policy, a defining role. He will decide whether the official definition of “super intelligence” should be modified or expanded. The order does not set a deadline for that decision.

A term that already means something else

The rename creates a vocabulary problem. In the AI field, super intelligence already refers to a specific kind of system, one that exceeds human cognitive ability in virtually every area of thinking. Nobody has built one. Researchers treat it as a future possibility, and much of the safety debate centers on it.

Under the order, federal documents will apply that label to chatbots, coding assistants and image generators that exist today. A reader who sees “SI” in a government report may assume the government is describing something far more advanced than what companies actually sell. Kratsios’s authority to modify the definition could narrow that gap, or it could widen it.

Timing and the push against regulation

The order follows a week of similar messaging. Trump began using the term at the U.N. General Assembly last week, where he pushed back on calls for tighter rules on the industry. He told world leaders that tech executives would build the right guardrails into their own models.

Concerns have grown since then. Worries about AI replacing workers keep rising. Recent reporting has also described rogue agents linked to a security breach involving Australia’s prime minister, and AI agents that accessed U.S. government websites. Some systems have also been used to start cyberattacks.

Trump has repeatedly called whistleblower warnings about weak oversight overblown and a “hoax.” He has said he will not slow AI growth. In his view, keeping American dominance in the technology is a national security matter.

The industry’s own safeguard

On the same day, tech executives signed a “morally binding” constitution on AI at the White House. Its terms ask companies to hire an independent external auditor. The auditor would check that models are “operating as intended.”

The document also asks companies to set up internal controls meant to stop models from hacking systems. A team would monitor those controls. That team would answer to an independent committee of the company’s board.

The wording matters here. “Morally binding” describes an obligation companies accept by choice. The reporting on the document does not describe fines, penalties or a government body that could enforce it. Whether outside auditors get real access to model internals, and what happens if one finds a problem, are open questions.

What the two actions have in common

The order and the constitution came out the same day, and they share a theme. Both keep the government’s role limited. The order changes what officials call the technology. The constitution leaves safety checks largely in company hands.

Supporters of that approach say it keeps American firms moving fast against foreign competitors. They argue that rigid rules written now could be out of date within a year. Critics say voluntary pledges have a weak record in other industries, and that a stronger name for the technology may make the public less cautious about it.

Neither side has settled the argument. What is clear is the direction of policy. The administration is choosing branding and industry commitments over new binding rules, at a moment when the documented incidents involving AI agents are piling up.

What happens next

Three things are worth watching over the coming weeks.

  • Kratsios’s definition. Any change to the official meaning of “super intelligence” will show how the administration wants the term understood.
  • Agency compliance. Federal sites and reports should begin switching to “SI” now that the order requires it.
  • The auditor provision. The industry constitution only matters if independent auditors are named, given access and allowed to publish what they find.

Congress has not yet responded to the order, and no agency has published a compliance timeline. Until Kratsios acts on the definition, “super intelligence” will mean one thing to researchers and something looser in federal paperwork.

Tech

Trump to Launch “AI Force” and Name AI Tsar Despite Safety Warnings

By George Mensah 4 min read

President Donald Trump says he will create an “AI Force” and appoint an artificial intelligence tsar, pushing back hard against a wave of warnings from researchers and industry leaders about the technology’s risks. In a social media post on Saturday, Trump said his administration “will not in any way hinder or stifle the growth” of the AI industry and rejected calls to slow development until stronger safeguards are in place. He gave no details on the AI Force’s structure or a timeline for when it would launch.

Trump frames AI as bigger than the internet

Trump described AI as a transformation on the scale of the Industrial Revolution. “AI is the next Industrial Revolution, or Internet, but will be even larger and more impactful, possibly as much as 25% of our Country’s GDP,” he wrote, adding that he wants the US to keep its lead over China in the field.

That competition now shapes much of the broader US-China relationship, with both countries pouring resources into advanced technology to gain an edge. The topic is expected to come up when Trump meets Chinese President Xi Jinping next week.

Trump also said his administration would rely on the existing criminal and civil justice system to go after anyone who uses AI for harmful purposes. He repeated his earlier position that warnings about AI’s dangers amount to a “hoax.”

Researchers raise alarms over catastrophic risk

Trump’s comments come amid mounting concern from current and former AI researchers. One has estimated there is a greater than 10% chance the technology could “kill all humans,” a claim that has unsettled parts of the industry and fueled calls for coordinated regulation.

Major AI labs are racing to build increasingly capable systems, including what they describe as superintelligence — AI that would exceed human intelligence across the board. Anthropic, OpenAI and Google, the companies behind Claude, ChatGPT and Gemini, have each disclosed security breaches or cases where their chatbots were used for what they called malicious activity.

Anthropic CEO Dario Amodei has called for the industry to slow down, proposing a coordinated deceleration, tighter regulation, and independent monitoring of how AI models are developed. Sam Altman of OpenAI and Elon Musk of xAI have both said they agree with Amodei’s recommendations.

Anthropic co-founder Jack Clark told the BBC that the industry may need a mandatory “kill switch” that a third party can verify, giving outside auditors a way to confirm AI systems can actually be shut down if something goes wrong.

Lawmakers weigh regulation as industry pushes back

These warnings have pushed US lawmakers to draft legislation targeting AI, but Altman argued this week that Washington has struggled to keep pace with how fast the technology is moving and how it should be regulated. Speaking at a conference in San Francisco, he said the public should trust AI companies to manage the risks themselves.

“The world should trust that we are going to do the right thing because it’s the right thing and we feel the magnitude of this,” Altman said.

That argument has not convinced everyone. In the UK, MPs and peers from across party lines have identified specific human rights risks tied to artificial intelligence and say current laws are not equipped to handle how quickly the technology is advancing. The Joint Committee on Human Rights has published a report calling for new legislation designed to “address the scale and seriousness” of these threats, adding pressure on governments to act faster than the industry itself seems willing to.

A widening gap between Washington and the industry’s critics

The contrast between Trump’s approach and the warnings from within the AI industry is stark. While Amodei, Clark and others are pushing for slower development and outside verification, Trump’s plan points toward expansion, with a dedicated federal structure and a senior official tasked with steering AI policy rather than restraining it.

Trump has not said who might serve as AI tsar or what authority the role would carry. He also hasn’t detailed how an “AI Force” would function, whether it would sit within an existing agency, or what its relationship would be to ongoing congressional efforts to draft AI legislation.

What’s clear is that the administration’s posture puts economic growth and competition with China ahead of the precautionary measures researchers and some AI company leaders are requesting. With Trump set to meet Xi next week and AI likely on the agenda, the coming weeks may offer a clearer picture of how the US plans to balance those competing pressures, both at home and internationally.

For now, the specifics remain open. No text or executive order describing the AI Force has been released, and it’s not yet known whether the initiative will move through Congress, come via executive action, or take some other form entirely.

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