Tech companies’ growing push to fund artificial intelligence investments is drawing sharper scrutiny as some executives redirect financial resources away from workers, including pay increases and employee retention.
Cloud software company Teradata has told its more than 5,000 employees not to expect a raise this year because its budget is being shifted toward AI, according to an internal memo obtained by Business Insider. The move has become a striking example of how corporate AI spending is beginning to affect compensation decisions inside major technology firms.
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Teradata Links AI Spending to Salary Adjustments
In the memo, Teradata CEO Steve McMillan said the company would fund its AI investment by reallocating money from 2026 annual salary adjustments.
“We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments,” McMillan wrote in the memo, according to the screenshots.
The decision is likely to intensify concerns among employees at a time when broader unease over AI’s impact on the workforce is already rising. The report suggests that some experts view the move as part of a wider pattern in which executives are prioritising AI spending over human labour costs.
Questions Grow Over AI’s Business Returns
The report also points to growing doubts about whether heavy AI investment is delivering the returns companies expect. It cites an MIT report from last year which found that 95 percent of AI pilot programmes at companies were failing and producing little to no measurable impact on profits.
This also refer to rising costs linked to replacing human staffers with AI, including large AI coding usage fees. These expenses have led some observers to question whether employing workers may, in some cases, be cheaper than relying heavily on AI systems.
The broader argument that AI will eventually replace workers and reduce costs is being challenged by practical realities, making decisions such as cutting raises to fund AI investments increasingly contentious.
Experts Warn of Workforce Backlash
Experts quoted by Business Insider said Teradata’s admission marks a notable shift in how technology leaders discuss their decisions. Workplace strategist and author Jennifer Moss said the company’s openness reflected a real change in what leaders were willing to say publicly.
“Whether that’s more honest or more cynical depends on your read, but it does mark a real shift in what leaders are willing to say in public,” Moss told the publication. “And what becomes sayable tends to become more doable.”
Oxford University economist Jan-Emmanuel De Neve told Business Insider that when leaders openly cut human compensation to fund AI, they may be trying to project decisive, technology-forward management. But he warned that the message received by workers is different.
“The actual message traveling to the workforce is that they do not have a secure future in the organization,” De Neve said.
