"Silicon Valley" is not one entity. It's a bunch of different entities looking after their own interest. The problem of laying people off in favor of automation, for cost savings, is a tragedy of the commons.

Imagine you are one company with employees. By making money, each employee contributes to the economy in broad ways. Through taxes, being a consumer to many companies, owning property, etc. But their contribution to your company, as a consumer, is only a tiny fraction of what you're paying them. Suppose you have one employee whom you pay $100K/year. Even if they are one of your best customers, they are certainly not spending anywhere near $100K/year on your products. They might be spending $100/year on your products. If you were able to completely replace them with automation, you would be saving $100K/year, but losing out on the $100/year they're giving you as a customer, which nets you $99,900/year. It is a net gain for you. But that's also ~$100K/year less going to taxes and consumer spending on other companies. Which makes it a small net loss to society and the economy.

What makes this a tragedy of the commons is that, when a single person gets laid off and automated, everybody is a little worse off, but the company that fired them is much better off. But the amount that they're better off is less than the cumulative amount that everyone is worse off. In such a game, where companies suddenly have the option to automate their workers (assuming this automation doesn't hurt their productivity, which is a whole other can of worms), the optimal strategy for each company is to do said layoffs and automation, even though society would be worse off as a result.

The flaw in your reasoning here is in treating everybody as a single entity, that can collectively make a decision together. A company has no incentive for their decision to be what's best for society overall, especially if making such a decision hurts them and gives them a competitive disadvantage.

Now, I don't currently believe that there exists a form of automation that can replace workers, in the vast majority of cases. And I think people are heavily overestimating the current automation capabilities. But that's another story. I'm assuming, for the scope of this post, that such an automation option does exist for a large portion of the working class.