Artificial intelligence has been cited in more than 120,000 announced U.S. job cuts in 2026, while new business applications are running near record highs. The same tools reshaping corporate payrolls are lowering the cost of going out on your own, but not everyone can afford to take that leap.
AI has become the leading reason American employers give for cutting jobs, and some of the workers losing those jobs may be using the same technology to build businesses of their own. That is the argument Molly Cavanah, vice president of revenue growth and data at Registered Agents Inc., makes in an October 16 column for Entrepreneur. Cavanah points to a wave of AI-linked cuts this year, including nearly 16,000 jobs at Amazon in January as it stripped out layers and bureaucracy, about 8,000 roles at Meta as it shifted resources toward AI, and more than 4,000 at Block, where CEO Jack Dorsey argued that smaller, AI-assisted teams can do more. She pairs those layoffs with unusually strong business formation numbers and makes the case that laid-off workers can combine their industry experience with AI tools to launch low-cost businesses, while warning that customer relationships still depend on a human touch.
The data behind her argument holds up. Through September, companies cited AI in 120,136 announced job cuts, about 21% of the total, making it the most common reason for layoffs so far in 2026, according to outplacement firm Challenger, Gray & Christmas, as reported by Fast Company. The technology sector alone has announced 165,925 cuts through September, up 54% from the same period last year. At the same time, Americans are starting businesses at a pace the country has rarely seen. The Census Bureau reported that the first half of 2026 was the biggest on record for new business applications, and July applications rose 8.1% from June to nearly 579,000, according to the bureau’s Business Formation Statistics. As Cavanah acknowledges, business applications don’t prove that laid-off workers are behind the surge, and not every registration becomes a working company. But the two trends are running side by side, and the overlap raises a question her column only begins to answer: who actually gets to turn a layoff into a business, and who doesn’t.
The Same Tools Cut Both Ways
The case for going solo is straightforward. The software that lets a large company do more with fewer people can also let one person do work that once required a small team. AI tools can help research a market, draft a business plan, build a basic website, write marketing copy, answer routine customer questions and handle administrative chores. Every task a founder can cover without hiring lowers the amount of revenue a new business needs to survive its first lean years.
The more valuable asset, though, is usually the experience a worker walks out the door with. People who spent years inside an industry know which processes waste time, which services cost too much and what customers complain about most. A laid-off claims adjuster, logistics manager or marketing director may already understand a problem well enough to build a consulting practice, a specialized service or a niche product around it. That kind of business often starts small, with a handful of clients and a laptop, and uses AI to keep costs low while the founder tests whether anyone will pay. Earlier this month, our Your Next Move column looked at how AI is making it cheaper to build your own income stream, and the same logic now applies to people who did not choose to leave.
Who Can Afford to Take the Leap
That path is not equally open to everyone, and that is where the story becomes an access question that deserves more attention than it usually gets. Starting a business after a layoff requires a financial cushion: savings to cover household bills while revenue builds, a way to pay for health insurance once employer coverage ends, and enough credit or capital to get through the slow months. A worker with a generous severance package and a spouse’s health plan can treat a layoff as a launchpad. A worker who was already living paycheck to paycheck may have to take the first job offered, even at lower pay.
We have seen that squeeze in our own reporting. In 142 Applications, Five Interviews, One Offer — and a $37,000 Pay Cut, a 46-year-old nonprofit leader described how a strong résumé did little to protect him in a tough market. Losing a job after 50 can force a career reset whether a worker wants one or not, and the broader economy is producing more with fewer workers, as we noted in White-Collar Business Is Growing. The Jobs Aren’t Coming With It. For many of those workers, entrepreneurship is less a dream than a fallback, and the difference between those two things often comes down to how much money and support they have when the layoff hits.
If You’re Considering It
The practical advice is to start smaller than you think. Before signing a lease, hiring anyone or buying expensive software, test the idea: talk to potential customers, build a simple version of the service, and see what people will actually pay. Revenue tells you more about an idea than a polished launch ever will. It also helps to add up household expenses and business costs together, so you know exactly how many months you can last before the business has to support you. If a layoff feels possible but hasn’t happened yet, our Your Next Move column on what to do before layoffs reach your company is a good place to start. For a fuller plan, our free guide, Layoff-Proof: The 2026 Playbook for Protecting Your Paycheck, walks through the warning signs of a coming layoff, a 90-day runway plan, how to negotiate severance, what to do in the first 48 hours after a cut, and how to start building a second income with AI before you need it.
AI can handle a surprising amount of the busywork, but it cannot replace the relationships that keep a small business alive. Customers hire people they trust, and trust still gets built through phone calls, follow-ups and showing up. That may be the quiet irony of this moment: companies are cutting workers to lean on machines, while the workers who succeed on their own may do it by being more human, not less. The open question is whether the economy will make room for those new businesses to grow, or whether a wave of one-person companies simply becomes the new way of absorbing jobs that are not coming back.
Sources: Molly Cavanah, Entrepreneur, Oct. 16, 2026; Challenger, Gray & Christmas, via Fast Company; U.S. Census Bureau Business Formation Statistics.