Career warning for Gen Z: How IT industry's AI obsession will create a purchasing power crisis, Zoho's Sridhar Vembu explains

The biggest challenge for India's young workforce may not be learning AI but finding enough jobs in an economy that is rapidly embracing it. That is the concern raised by Zoho co-founder and Chief Scientist Sridhar Vembu, who believes the country's real problem is no longer just technology adoption but ensuring that millions of young people have access to meaningful employment.

In a post shared on X, Vembu argued that while artificial intelligence is making software development faster and cheaper, it is also changing where companies spend their money. Instead of expanding teams, businesses are increasingly investing in AI infrastructure and computing power, creating a new challenge for job creation.

AI investments replacing hiring budgets

Vembu said India's IT industry has slowed its pace of hiring, including at Zoho.

He wrote, "The real issue facing our nation is how to create jobs for our massive cohort of youth in this very uncertain global landscape."

He added, "Sadly, the IT industry, including Zoho, have not created many jobs in recent years. We have not laid off people but we are not creating new jobs either."

According to him, the money that companies would normally spend on recruiting fresh employees is now being redirected towards artificial intelligence and expensive data centre infrastructure.

"The money that would have gone to new employees is now going to AI and data center costs, the latter due to the steep rise in server and memory prices. We are trying to control those costs but a lot of that is out of our control."

More software, but is there enough demand?

Vembu believes AI has made it possible for companies to build software much faster. However, he questioned whether the market actually needs such a large increase in software products.

He wrote, "While AI allows us to produce more software quicker, does the over-saturated global software market need a lot more software? Like any commodity industry, the focus shifts to quality, reliability, brand and so on and growth will be much slower."

He also pointed out that many enterprise customers have shifted their technology budgets towards AI projects. At the same time, AI companies themselves are investing heavily in infrastructure.

According to Vembu, "Software customers (large and mid-sized enterprises) also have redireced their own IT spending towards AI. Even the AI companies which are growing very rapidly are borrowing and spending huge amounts of money in capex, and it is not clear they will achieve the massive profits they need to justify all the capex."

The bigger economic question

Looking beyond the software industry, Vembu said automation is reducing employment opportunities in manufacturing as well, making it harder to identify sectors capable of absorbing India's growing workforce.

He asked, "What other industry can pick up the slack? Extensive automation means that large scale manufacturing produces few jobs."

Even so, Vembu said cheaper production has long-term economic benefits because it makes goods more affordable. But he believes the bigger challenge is ensuring people still earn enough to buy those products.

He wrote, "As an economic thinker, this is a good thing: ultimately all kinds of goods, including advanced tech products become very affordable because production becomes so cheap. The 'only' question is how the economy is structured so people have the income to afford those affordable goods."

He concluded by saying that this question has no easy answer. "That 'only' question, simple in theory, is not easy in practice. Some people think the answer is Universal Basic Income (UBI) and some of that is already happening in India (we call them freebies). We can expect the political pressure to do a lot more."