Advanced Micro Devices (AMD) has announced plans to lay off 4% of its global workforce, impacting roughly 1,000 employees. To stay competitive, AMD will lay off 4% of its global employees to invest more in AI technologies. The company is refocusing its efforts on developing AI chips to compete more effectively against industry giant Nvidia. According to an AMD spokesperson, the restructuring aims to align resources with high-growth opportunities.
The company’s data center segment, which includes its AI graphics processors, experienced over two-fold growth in the September quarter. In contrast, its personal computer segment grew by 29%, while gaming sales declined sharply by 69%. Analysts, according to LSEG estimates, predict a significant 98% growth in AMD’s data center revenue for 2024, compared to a modest 13% growth in overall revenue.
Major Investments in AI Chips to Drive Revenue
AMD will lay off 4% of its global employees as part of its strategy to reallocate resources toward AI chip development. AMD is investing heavily in AI chip development to meet rising demand from hyperscalers like Microsoft. The company plans to begin mass production of its new MI325X AI chip in Q4 2024. However, scaling up production remains costly due to limited manufacturing capacity. R&D expenses jumped nearly 9% in Q3, with total sales costs also increasing by 11%.
Despite AMD’s aggressive push into AI, its shares have fallen over 3% in 2024. Last year, investor enthusiasm around AI boosted AMD’s stock two-fold, but the recent focus on AI chips has yet to translate into similar gains. Meanwhile, Nvidia’s stock has surged by 200% this year, driven by its dominant market position in AI chips. Nvidia currently controls over 80% of the AI GPU market, supported by its specialized software that powers generative AI technologies like OpenAI’s ChatGPT.
Competition and Future Outlook
AMD will lay off 4% of its global employees in response to rising competition in the AI chip industry led by Nvidia. AMD, which had approximately 26,000 employees at the end of last year, is the second-largest GPU maker after Nvidia. The company projects $5 billion in AI chip sales in 2024, which is a fraction of Nvidia’s projected $125.9 billion in revenue. While AMD expects the AI chip market to reach $500 billion by 2028, it faces an uphill battle in narrowing the revenue gap with Nvidia.
AMD’s push into AI comes as its gaming segment struggles, with revenues expected to decline by 59% next year. Beyond AI, the company also competes with Intel in the processor chip market for desktops, laptops, and servers. According to Mercury Research, AMD’s share of server CPU sales rose to 34% in Q3, reflecting steady gains against Intel.
These strategic changes at AMD will be closely monitored by investors as the company seeks to enhance its position in the rapidly evolving chip industry. The competition between AMD and Nvidia is intensifying, especially as AI adoption accelerates in data centers globally.
Growth and Workforce Reduction Must Be in Balance
AMD’s decision to lay off 4% of its workforce while doubling down on AI chip development reflects the company’s attempt to remain competitive in the rapidly evolving semiconductor industry. However, this move raises concerns about whether downsizing is the right strategy.
Laying off skilled employees might impact morale and disrupt ongoing projects. Although reallocating resources to high-growth areas makes business sense, reducing the workforce could limit AMD’s capacity to address unexpected challenges or capitalize on new opportunities. Furthermore, the layoffs may strain the company’s ability to retain talent in an industry already grappling with labor shortages. The approach seems risky, especially when AMD needs every bit of its workforce’s expertise to push through the highly competitive AI market.
Also Read: Gemini AI Might Enable Voice-Controlled File Editing for Seamless Document Control
