I think there's still a huge amount of work to go through the codebase and add appropriate (and safe) hooks for the AI to act upon. That means a complete pivot in what the staff work on but i don't think layoffs make sense as since there's an urgent need to pivot to be first in this space.
The context recognition is there sure. But teams working on old models of context recognition (more hardcoded methods) are still engineers and there's a need to throw engineers at this to be first.
Imagine saying in winter "Make my living room feel like a summer beach party" leading to blinds up + lights on with yellow hue + heat + ambient beach music turning on. That needs hooks into every first and third party home automation system. It needs the ability to choose specific genres of music on a playlist. etc. There's so much work to do and it needs to be done before the competitors. Firing engineers, even when they would need to pivot to achieve this doesn't make sense to me as this is one of those winner takes all technology races. You really really want to be the first to set the standard for how third parties integrate these hooks.
It's an iPhone moment in the making and Amazon is firing staff.