AMD Will Cut 4% of Global Workforce in Favor of AI Chip Development
Advanced Micro Devices (AMD) recently announced plans to reduce its global workforce by 4%, meaning a layoff of around 1,000 employees, to advance artificial intelligence (AI) chip technology. This decision aims to bolster AMD's ability to beat its biggest competitor Nvidia, a chip industry leader. An AMD spokesperson said on Nov 12th that AMD was taking targeted measures to let the company's capital maximize the development of AI chip technologies. This declaration can be seen as a statement of AMD's ambitions for the profitable chip industry.
Its fiscal data indicates its ambitions. In the third quarter, AMD's data center segment experienced significant growth, with revenue more than doubling, fueled by AI-focused graphics processors. Conversely, the personal computing sector saw a more moderate rise of 29%, while the gaming segment took a substantial hit, declining by approximately 69%. Analysts are optimistic about the potential of AMD’s data center segment, forecasting a nearly 98% growth in 2024. In comparison, the company's total revenue is expected to grow by 13% on average, according to LSEG estimates.
To maintain momentum in the AI chip market, AMD has invested heavily in R&D, with related expenses climbing nearly 9% in the third quarter. Production costs also rose by 11%, as AMD prepares to launch mass production of its latest AI chip, the MI325X, by the fourth quarter. The costs associated with producing AI chips are notably high, largely due to limited manufacturing capacity, which makes scaling up production a challenging endeavor.
Despite these forward-looking efforts, AMD’s stock has dropped by over 3% year-to-date. Investors are wary of the company's performance amid high expectations that followed a twofold stock surge last year, fueled by optimism around AI-related opportunities.
