Israeli High-Tech Sector Cuts 18,000 Jobs Amid AI Integration and Currency Shifts

Despite a slight increase in employment in June, Israel's high-tech sector remains down by approximately 18,000 jobs compared to February, before the outbreak of war. According to a report by Jonathan Katz and economists at Leader Capital Markets, the number of employees in the sector rose to 426,400 in June from 421,000 in May, but this is still significantly lower than the 444,600 workers employed in February. This represents a 4.1% decline in jobs over the period.

Leader Capital Markets attributes this moderate reduction in high-tech employment primarily to the growing integration of artificial intelligence (AI) in the industry, rather than to currency fluctuations alone. While the Israeli shekel weakened significantly after May, the wave of layoffs has continued, indicating a deeper structural change in workforce composition. The shekel's exchange rate moved from a low of about 2.80 per dollar in late May to 3.05 by the end of July, yet job cuts persisted.

Several major companies exemplify this trend. Monday.com announced layoffs of around 620 employees globally, with over half of those cuts (about 350) in Israel, citing organizational restructuring to adapt to a work environment combining human workers and AI agents. Wix also cut roughly 20% of its workforce, close to 1,000 employees, attributing the reduction to both the strong shekel and AI-driven changes. Rapid underwent organizational changes including layoffs of dozens to over 100 employees, with its CEO stating the company is now "operated through AI." MyHeritage followed in July with a 15% workforce reduction, about 75 employees.

While the strong shekel has affected profitability for companies earning in dollars but paying salaries in shekels, it mainly accelerated the ongoing shift. The broader common factor is AI, which enables software companies to develop, test, market, and support products with fewer employees. Investments are shifting from legacy products and roles to AI engines and new positions. Therefore, the slight employment increase in June may reflect short-term fluctuations rather than a reversal of the trend. The Israeli high-tech sector continues to grow and hire in certain areas, but the once nearly automatic link between revenue growth and workforce expansion is weakening.