President Donald Trump abruptly scrapped a planned artificial intelligence executive order on 21 May 2026 after his AI and crypto advisor David Sacks raised eleventh-hour objections, catching White House staff off guard and throwing months of interagency policy work into disarray. The incident reveals the extraordinary influence that Silicon Valley figures wield within the current administration and the continuing tension between those who advocate AI governance frameworks and those who fear any form of regulation could undermine American technological supremacy.

According to multiple reports from Politico and other Washington outlets, the executive order had been in development for weeks, with input from multiple federal agencies, industry stakeholders, and White House policy staff. Sacks had participated in a review of the order earlier in the week, and senior officials believed he was generally supportive of its contents. However, on the evening before the planned signing, Sacks began raising concerns about specific provisions in the order.

The next morning, Sacks called President Trump directly, without informing his own White House staff, to express his objections. The call apparently persuaded Trump to shelve the order entirely. When asked about the decision by reporters on Thursday morning, Trump said plainly that he did not like certain aspects of the order and did not want to do anything that could impede America’s lead in AI technology over China and other competitors.

What the Executive Order Would Have Done

While the full text of the scrapped executive order has not been made public, officials familiar with its contents say it would have established a voluntary framework for AI companies to follow when developing and deploying powerful AI systems. The framework reportedly included guidelines for safety testing, transparency requirements for government-facing AI applications, and mechanisms for industry self-reporting on the capabilities of frontier AI models.

Critically, the order was described as voluntary rather than mandatory, meaning companies would not face legal penalties for non-compliance. However, this distinction was precisely what concerned Sacks. According to sources close to the discussions, Sacks argued that voluntary frameworks have a tendency to become mandatory over time, particularly when political winds shift or when a high-profile AI incident creates public pressure for stricter oversight. He feared that establishing any government framework, even a non-binding one, would create a precedent that future administrations could use as the basis for binding regulation.

This concern echoes a broader philosophical debate within the technology industry about the appropriate role of government in AI governance. Companies like OpenAI, which recently launched its GPT-5.5 model, have publicly called for thoughtful AI regulation while simultaneously lobbying against specific proposals that could constrain their business models. The tension between supporting AI safety in principle and opposing concrete regulatory measures in practice has been a defining feature of the AI policy landscape.

Silicon Valley’s Influence on White House AI Policy

The episode underscores the remarkable access that technology industry leaders enjoy within the Trump administration. David Sacks, a venture capitalist and former PayPal executive, was appointed as the White House AI and crypto czar in early 2025. His role gives him a direct line to the President on technology policy matters, and the scrapping of the executive order demonstrates that he is willing to use that access to override the work of career policy staff when he believes industry interests are at stake.

The incident reportedly blindsided several White House officials who had spent months developing the executive order and believed they had Sacks’s support. The fact that Sacks called the President directly, bypassing the normal chain of communication within the White House, suggests a level of freelancing that is unusual even in an administration known for its informal decision-making processes.

Technology companies have broadly welcomed the decision to shelve the order. Industry trade groups and individual companies had been lobbying quietly against various provisions of the proposed framework, arguing that the United States should not impose any constraints on AI development at a time when it faces intense competition from China, the European Union, and other nations. The rapid pace of AI advancement, exemplified by recent announcements from Google, OpenAI, and others, has made the competitive argument particularly resonant.

Critics Warn of Unchecked AI Development

Not everyone views the scrapped executive order as a positive development. AI safety researchers, civil society organisations, and some members of Congress from both parties have expressed concern that the United States is effectively choosing to have no federal AI governance framework at a time when the technology is advancing at unprecedented speed and being deployed in increasingly consequential domains.

Democratic lawmakers on the Senate Commerce Committee issued a statement calling the decision reckless and irresponsible, arguing that even a voluntary framework would have been better than the current vacuum of federal AI policy. They pointed to the growing use of AI in hiring decisions, criminal justice, healthcare diagnostics, and financial services as evidence that the technology’s impact on ordinary Americans demands at least basic governance guardrails.

AI safety researchers have been particularly vocal in their criticism. Several prominent figures in the field, including researchers at major AI labs, have argued that the absence of any federal framework creates a race-to-the-bottom dynamic where companies feel pressured to deploy increasingly powerful AI systems without adequate safety testing. The concern is not hypothetical: incidents involving AI systems making consequential errors in medical diagnosis, content moderation, and autonomous vehicle operation have become increasingly common.

Global AI Governance Divergence

The US decision to shelve AI governance measures stands in stark contrast to the approach taken by the European Union, which has been implementing its comprehensive AI Act since 2024. The EU framework classifies AI applications by risk level and imposes strict requirements on high-risk systems, including mandatory conformity assessments, human oversight provisions, and transparency obligations. Several other countries, including Canada, Japan, and South Korea, have also established or are developing national AI governance frameworks.

This divergence creates a complex landscape for multinational AI companies that operate across jurisdictions. A company like Google or Meta must comply with EU AI Act requirements in Europe while facing no equivalent obligations in the United States, creating an uneven regulatory playing field that some analysts argue actually disadvantages American companies by leaving them unprepared for the governance requirements they face in other markets.

For India, which is developing its own approach to AI governance, the US decision provides useful data points for its policy deliberations. India has been charting a middle path between the EU’s comprehensive regulatory approach and the US’s increasingly hands-off stance, focusing on sector-specific guidelines and voluntary industry codes of practice. The outcome of the American debate will inevitably influence India’s own choices, given the deep technology ties between the two countries and the significant role that US-headquartered AI companies play in the Indian market.

What Happens Next

White House officials have indicated that the executive order is not permanently dead but rather paused for further review. However, given the strength of Sacks’s objections and Trump’s clear reluctance to impose any constraints on the AI industry, the prospects for a revised order emerging in the near term appear slim. The administration’s AI policy is likely to remain focused on promoting innovation, reducing barriers to AI adoption, and maintaining the United States’s competitive position against China rather than on establishing governance frameworks or safety requirements.

The episode also raises questions about the decision-making process within the White House on technology policy matters. If a single advisor can derail months of interagency work with a phone call, it suggests that AI policy is being driven more by personal relationships and industry access than by structured policy development. Whether this approach serves the broader national interest or primarily benefits the technology companies that have the closest ties to the administration remains an open and increasingly important question.

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The Numbers Behind Meta’s Biggest-Ever Layoff

As of December 31, 2025, Meta had nearly 79,000 employees on its payroll. The initial round of 8,000 cuts on May 20 would reduce that headcount by roughly 10 per cent in a single stroke. But internal sources suggest the company is considering cutting as much as 20 per cent of its total workforce across multiple rounds throughout 2026.

The details were confirmed through an internal memo sent by Meta’s Chief People Officer Janelle Gale, who outlined the severance package for affected US employees. According to the memo, impacted workers will receive 16 weeks of base pay plus two additional weeks for every year of service, continued health insurance coverage, accelerated stock vesting for certain roles, and career transition support. International employees, including those in India, are expected to receive packages aligned with local labour laws.

This surpasses Meta’s previous major layoffs — the 11,000 job cuts in November 2022 and 10,000 in March 2023 — making the 2026 restructuring the most significant workforce reduction in the company’s 22-year history.

Why Meta Is Cutting Jobs: Zuckerberg’s $135 Billion AI Gamble

The layoffs are directly linked to Mark Zuckerberg’s aggressive pivot toward artificial intelligence. Meta has committed an extraordinary $135 billion in capital expenditure for 2026 alone, primarily directed at AI infrastructure including data centres, GPU clusters, and model training facilities. Looking further ahead, the company has pledged $600 billion toward US AI infrastructure by 2028.

The logic driving the restructuring is straightforward: invest massively in AI capabilities, then reduce the human workforce that AI systems can increasingly replace. Meta’s leadership believes that autonomous AI agents — capable of writing code, managing campaigns, creating content, and handling complex multi-step tasks — will fundamentally change how the company operates and how its products serve users and advertisers.

In recent weeks, engineers from across the company have been reorganised into a new “Applied AI” division focused on building these autonomous agents. Other staff are being transferred into Meta Small Business, a unit created just weeks ago to serve small and medium enterprises with AI-powered advertising and commerce tools. These structural shifts signal that the company is not merely cutting costs — it is fundamentally reshaping what kind of company Meta will be.

Which Departments Face the Deepest Cuts

The layoffs are not falling uniformly across Meta’s operations. According to sources familiar with the plans, the hardest-hit areas include:

Reality Labs: Meta’s virtual and augmented reality division, which has lost more than $50 billion since 2019, is expected to see significant reductions. While Zuckerberg has not abandoned the metaverse vision entirely, the investment priority has clearly shifted from VR hardware to AI software.

Middle management: A substantial portion of the cuts target managerial roles as the company flattens its organisational structure — a trend visible across the tech industry in 2026.

Content moderation and trust & safety: Teams that have traditionally relied on large human workforces are being restructured as AI moderation tools become more capable.

Legacy product teams: Engineers working on older Facebook and Instagram features that are being sunset or absorbed into AI-driven products are also at risk.

Impact on India Operations

Meta operates significant engineering, product development, and content moderation operations in India, primarily through offices in Hyderabad, Gurugram, and Bengaluru. While the company has not disclosed country-specific layoff figures, industry analysts expect India to be affected proportionally.

The broader context is concerning for India’s tech workforce. Meta’s layoffs follow Oracle’s abrupt termination of 12,000 Indian employees earlier in April, and come at a time when AI automation is reshaping hiring patterns across the Indian IT industry. A recent NASSCOM report estimated that 15 to 20 per cent of India’s IT services jobs are at risk of displacement by AI tools over the next three to five years.

However, Meta has also been expanding its AI research presence in India, suggesting that while some roles will be eliminated, new positions in AI engineering and machine learning may partially offset the losses over time.

The Broader Tech Industry Context

Meta’s layoffs are part of a wider pattern of AI-driven workforce restructuring across Silicon Valley and the global tech industry in 2026. Major companies including Google, Amazon, Microsoft, and Salesforce have all announced restructurings that shift resources from traditional engineering and operations roles toward AI development and deployment.

The scale of investment is staggering. Between them, the top five US tech companies are expected to spend more than $400 billion on AI infrastructure in 2026, up from approximately $220 billion in 2025. This spending spree is creating enormous demand for AI specialists, GPU engineers, and data scientists, even as it eliminates positions in areas where AI can perform tasks more efficiently.

Wall Street has largely rewarded these moves. Meta’s stock has risen approximately 18 per cent since the restructuring plans were first reported, as investors bet that the combination of lower headcount costs and higher AI productivity will drive margins significantly higher. The company’s market capitalisation has crossed $1.6 trillion, making it one of the most valuable companies in the world.

The Severance Package and Employee Reaction

Meta’s severance package, while generous by industry standards, has not shielded the company from employee anger. Internal message boards have reportedly been filled with criticism of the company’s communication approach, particularly the perception that decisions were made without adequate input from affected teams.

Some employees have pointed to the disconnect between the company’s record-breaking AI spending and its decision to cut thousands of workers, arguing that the profits generated by existing teams have funded the very AI investments that are now being used to justify their termination.

Labour advocates have called for stronger protections for tech workers displaced by AI automation, including mandatory retraining programmes, extended health coverage, and restrictions on companies simultaneously reporting record profits while conducting mass layoffs. The situation mirrors debates playing out across the global AI industry about the social contract between technology companies and their workers.

What Comes Next for Meta

The May 20 cuts are explicitly described as the first phase. Meta’s leadership has indicated that additional layoffs will follow in the second half of 2026, though the scale will depend on how quickly AI tools can absorb functions currently performed by human employees. If internal projections hold, Meta could emerge from 2026 with a workforce 20 per cent smaller than it began the year with — but one that is fundamentally restructured around AI-first operations.

For the tech industry globally, and for India’s IT sector specifically, Meta’s restructuring is a harbinger of what many companies are preparing for: a world where AI capability, not headcount, determines competitive advantage.

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