AMD is set to reduce its workforce by 4%, translating to approximately 1,000 employees, as part of a strategic move to strengthen its position in the artificial intelligence (AI) chip market, where it trails behind leading competitor Nvidia. This decision, announced Wednesday, aims to align AMD’s resources with key growth opportunities, particularly in the AI chip space, which the company views as a significant avenue for expansion.
An AMD representative confirmed the layoffs, stating, “As a part of aligning our resources with our largest growth opportunities, we are taking a number of targeted steps that will unfortunately result in reducing our global workforce by approximately 4%.” AMD emphasized its commitment to treating affected employees with respect and assisting them through the transition.
AMD, with 26,000 employees as of last year, holds the position of the second-largest producer of graphics processing units (GPUs) after Nvidia. The company has identified AI as one of its most promising growth sectors. Despite this focus, AMD’s stock has dropped 5% this year, contrasting with Nvidia’s sharp 200% gain, which has propelled Nvidia to the top position among publicly traded companies in market valuation.
In its product lineup, AMD offers AI accelerators, such as the MI300X, for data center use, with clients including Meta and Microsoft seeking alternatives to Nvidia-based systems. However, Nvidia continues to command over 80% of the AI chip market share, largely due to its development of core software that has become standard for AI engineers, enabling the creation of applications like OpenAI’s ChatGPT.
In October, AMD projected $5 billion in AI chip sales for 2024, a figure that constitutes around 20% of its expected total revenue of $25.7 billion for the year, according to data from FactSet. In contrast, Nvidia is projected to achieve $125.9 billion in revenue for 2024, underscoring the scale of its dominance in the sector. Looking ahead, AMD estimates the AI chip market could reach $500 billion by 2028, signaling significant growth potential despite Nvidia’s current lead.
Originally developed for gaming, GPUs are seeing an expanded role in AI, though AMD’s gaming segment faces challenges. FactSet forecasts a 59% decline in AMD’s gaming revenue for 2024, with a projection of $2.57 billion. Beyond GPUs, AMD produces processor chips for devices such as laptops, desktops, and servers, where it competes primarily with Intel. In the third quarter, AMD’s server CPU market share rose nearly 3% year-over-year, reaching 34%, according to Mercury Research.
Featured image courtesy of Time
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