AI obsession drives mass layoffs as tech leaders warn of 'AI psychosis'

Box founder Aaron Levie has coined the term 'AI psychosis' to describe executives who believe AI can replace workers without understanding what those jobs actually entail. ClickUp recently cut 22% of its workforce in favour of AI agents, and tech layoffs in 2026 are already nearly matching the total for all of 2025.

A growing wave of AI-driven layoffs is sweeping through the technology industry, with critics warning that executives are becoming dangerously detached from workplace reality. Box founder Aaron Levie has put a name to the phenomenon, calling it 'AI psychosis' — a state in which the people making decisions about replacing workers with AI are precisely those least equipped to understand what those workers actually do.

ClickUp cuts signal a broader trend

The warning comes as concrete examples of AI-motivated downsizing continue to mount. Project management platform ClickUp recently cut 22% of its workforce, citing the deployment of AI agents as a replacement for human roles. The move is part of a broader pattern: tech sector layoffs in 2026 are already tracking close to the total figure recorded across the entire year of 2025, suggesting the pace of AI-driven job displacement is accelerating sharply.

When leaders misread their own companies

Levie's critique cuts to a fundamental tension in how AI adoption decisions are made. Senior executives and board members who champion large-scale automation often have limited direct exposure to the day-to-day work being eliminated. This disconnect, according to Levie, creates the conditions for poor decisions that harm both employees and the long-term health of a company.

The human cost of AI enthusiasm

The trend raises urgent questions about accountability in the AI era. While AI tools can genuinely improve productivity in many areas, blanket workforce reductions made on the assumption that software agents can seamlessly absorb complex human roles carry significant risk. Industry observers note that companies moving too aggressively may find themselves struggling with quality, institutional knowledge loss, and employee morale — consequences that rarely appear in the slide decks used to justify the cuts.