Record Revenue, Record Cuts: Wall Street's AI Paradox
Newsletter #64
The Bank That Fires Best Is Now the Bank That Earns Best
Citigroup has begun one of the most aggressive restructurings on Wall Street, starting with around 1,000 cuts as part of a broader plan to eliminate 20,000 roles and reset its cost base by roughly $200 million. On March 9, Block announced 4,000 layoffs with CEO Jack Dorsey explicitly pointing to AI capabilities as the justification. Salesforce had already cut 4,000 roles in 2025, citing the same reason.
What is striking is that these firms are not in distress. They are optimising. The message is increasingly clear: AI does not just replace workers when the economy turns. It replaces workers on the way up too.
Hedge Funds Want Fleets of AI Bots
While the banks are cutting, the hedge funds are building. On March 3, Bloomberg reported that hedge fund founder Divya Nettimi believes fleets of AI bots will be running research and executing trades across hundreds of stocks within three to five years. This is not a futurist prediction. It is a description of where the most sophisticated funds are already heading.
Firms like Citadel, Millennium, and Point72 are now using AI not only as a sector to invest in but as an operational edge. The thesis is that AI generates earnings dispersion across tech companies, and the funds best equipped to exploit that dispersion are those that have already embedded machine learning into their signal generation and risk systems. HedgeCo reported this week that major funds are repositioning around AI and tech volatility, using options strategies to capture upside while limiting downside from crowded trades and sudden reversals.
The algorithmic trading market reflects this shift in dollar terms. According to a new industry analysis, the market is projected to grow from $21.89 billion in 2025 to $25.04 billion in 2026, a 14.4% annual increase, on track to reach $44.34 billion by 2030. That is not a niche corner of markets anymore. It is the market.
The Macro Signal Nobody Wants to Talk About
Against this backdrop, Friday’s February jobs report delivered a genuine shock. The U.S. economy shed 92,000 nonfarm payroll jobs in February, well below expectations and enough to push unemployment to 4.4%, the highest level in nearly two years. Stagflation fears are being raised openly on Wall Street for the first time in this cycle.
This matters for quants in two ways. First, a weaker labour market with sticky inflation is a particularly tricky regime for systematic macro strategies, which tend to struggle when traditional correlations between growth and rates start breaking down. Second, and more personally, it is the backdrop against which graduate hiring in finance is being cut. The very jobs that would once have served as on-ramps into the industry are being hollowed out at both ends: by AI from above, and by a softening economy from below.
What I Am Watching
The story I am most focused on heading into next week is the Federal Reserve’s rate decision and how the jobs data reshapes market expectations. Macro funds have been pricing in two to three cuts this year. If stagflation fears intensify, that repricing could create exactly the kind of volatility that algorithmic strategies thrive on but that trend-following systems struggle to navigate.
I am also watching how quickly the next wave of layoff announcements arrives. Block and Morgan Stanley this week set a template: cite AI, cut headcount, protect the share price. If Amazon, JPMorgan, or Goldman move in the same direction before Q2, we will know this is a structural shift, not a trimming exercise.
The machine is being built. The question for everyone reading this is where you want to be standing when it comes online.
Sources: Bloomberg: AI Bots Could Transform Hedge Fund Research and Trading · FinancialContent: Labor Market Shock: U.S. Sheds 92,000 Jobs in February · Yahoo Finance: Layoffs Surge in 2026 · HedgeCo: Hedge Funds Reposition Around AI and Tech Volatility · Yahoo Finance: Algorithmic Trading Analysis Report 2026 · Yahoo Finance: Wall Street Is Starting to Trim Jobs
New Interview Questions Website (OUT NOW)
Check it out for free: HERE
Other Media
Twitter: @quant_prep
Medium: @quant_prep
LinkedIn: Quant Prep
Free Stoikov Market Making Code: Here
Free BTC Options Notebook: Here
Free CV template: Here