AMD Shifts Focus to AI Chips, Trims Workforce by 4%
In a strategic move to capitalize on the booming market for artificial intelligence (AI) technology, Advanced Micro Devices (AMD) is restructuring its operations, resulting in the layoff of approximately 1,000 employees, or 4% of its global workforce.
Competing with Nvidia in the AI Chip Market
AMD is widely regarded as the closest competitor to industry leader Nvidia in the lucrative market for chips that power complex data centers. These data centers are essential for processing the vast amounts of data required by generative AI technologies like OpenAI’s ChatGPT.
Aligning Resources with Growth Opportunities
According to an AMD spokesperson, the company is taking targeted steps to align its resources with its largest growth opportunities. This includes investing heavily in the development of AI chips, which command high selling prices and are in high demand among hyperscalers like Microsoft.
Data Center Segment Drives Growth
AMD’s data center segment, which houses its AI graphics processors, has seen revenue jump more than two-fold in the September quarter. In contrast, the personal computer segment grew 29%, while sales in its gaming unit slumped about 69% during the same period. Analysts predict the data center unit will grow 98% in 2024, outpacing expected total revenue growth of 13%.
Mass Production of AI Chips
AMD plans to start mass production of its new artificial-intelligence chip, the MI325X, in the fourth quarter of the year. However, ramping up production of AI chips is an expensive undertaking due to constrained manufacturing capacity. As a result, the company’s research and development costs jumped close to 9% in the third quarter, while its total cost of sales rose by 11%.
Shares Drop Amid High Expectations
Shares of AMD have dropped more than 3% so far this year, as the company struggles to meet investors’ high expectations after Wall Street drove a two-fold surge in its shares last year, betting on the returns linked with AI technology.
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