Forget salary hikes, this tech CEO says AI investments take priority

First, artificial intelligence (AI) took jobs; now it's also impacting employees’ pay packages and hikes. Companies across the globe have revamped their business operations as they rapidly adopt the technology to streamline tasks. As a result, spending on AI has surged significantly, prompting firms to redirect resources.

According to a Business Insider report, Teradata, a global cloud software company, has reportedly decided to freeze annual pay raises for employees. It is said that the company will redirect the salary hikes toward AI investments. The company told its 5100 employees in January that an annual salary hike would not be placed in 2026.

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Teradata CEO Steve McMillan highlighted in an internal memo that the company is focusing on scaling AI efforts this year, and that the majority of investment will be directed to bring AI talents to “in the market with AI.

“We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments,” McMillan said. However, the memo highlighted that employees will be getting performance-based bonuses and equity shares.

Two of the US-based Teradata employees, who have been in the company for over 10 years, highlighted that every year the company offers 2% to 4% annual salary hikes, and this is also not guaranteed. 

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Companies are reportedly pouring the majority of their resources into AI. It is suggested that even a small AI project may cost tens of thousands of dollars, whereas a large-scale AI deployment across a company can cost millions of dollars. As organisations race to adopt the technology, many are struggling to control rising AI spending, prompting them to reduce hiring, cut jobs, limit salary increases, or trim other expenses to fund AI initiatives.

With layoffs already weighing heavily on employees, no pay raises are adding another layer of uncertainty to the workforce. Several tech companies, including Meta, Snap, Cisco, and others, have cited AI as the reason for workforce reduction. Recently, Google was also reported to sell $80 billion in stock to increase AI investment. Therefore, companies are making difficult trade-offs as they race to stay competitive in the AI era.