Advanced Micro Devices (AMD) has announced a significant restructuring plan, which includes cutting 4% of its global workforce, or approximately 1,000 employees, as the company shifts its focus towards the development of AI chips.
This move is aimed at positioning AMD as a strong competitor to industry leader Nvidia in the rapidly growing AI chip market1.
AMD: Strategic Realignment & Investment in AI Chip
As part of aligning its resources with the largest growth opportunities, AMD is taking several targeted steps, including workforce reductions. An AMD spokesperson stated, “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%”.
The company is committed to treating impacted employees with respect and assisting them through this transition.
AMD’s data center segment, which houses its AI graphics processors, has seen remarkable growth, with revenue more than doubling in the September quarter.
Analysts expect this segment to grow by 98% in 2024, significantly outpacing the company’s overall expected revenue growth of 13%.
This growth underscores the importance of AI chips in AMD’s strategy.
AMD has been heavily investing in the development of AI chips, which command high selling prices and are in high demand among hyperscalers like Microsoft.
The company plans to start mass production of a new version of its AI chip, the MI325X, in the fourth quarter of the year.
However, ramping up production is an expensive and challenging task due to constrained manufacturing capacity.
Financial Performance and Market Response
Despite the positive growth in its data center segment, AMD’s overall financial performance has faced challenges.
The company’s research and development costs increased by nearly 9% in the third quarter, and its total cost of sales rose by 11%.
Shares of AMD have dropped more than 3% this year as the company struggles to meet investors’ high expectations.
AMD’s decision to cut its global workforce and focus on AI chip development is a strategic move to capture a larger share of the lucrative AI market.
While the layoffs are a difficult step, they are part of AMD’s broader plan to realign its resources and drive growth in its data center segment.
The company’s commitment to innovation and competitiveness will be crucial as it navigates the challenges and opportunities in the AI industry.
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