AMD (AMD, Financial) announced plans to reduce its global workforce by approximately 4% as part of a strategic effort to enhance its position in the AI chip market, a sector currently dominated by Nvidia. The company emphasized its commitment to treating affected employees with respect and providing support during this transitional period. The specific departments impacted by these layoffs remain unspecified.
According to the U.S. Securities and Exchange Commission's documents, AMD had about 26,000 employees at the end of last year, indicating that roughly 1,000 positions will be cut. The decision aligns with AMD's focus on aligning resources with the most promising growth opportunities, especially in the AI sector, which the company considers one of its largest growth prospects.
AMD produces powerful AI accelerator chips for data centers, including the MI300X, positioning itself as an alternative to Nvidia systems for companies like Meta and Microsoft. Despite being the world's second-largest GPU manufacturer after Nvidia, AMD has underperformed in the stock market this year, with a 5% decline in share price compared to Nvidia's 200% increase.
AMD's recent financial report showed mixed results, with overall growth in revenue and profit but a 69% year-over-year decline in its gaming segment. The company projected that its AI chip sales would reach $5 billion in 2023, with the AI chip market expected to grow to $500 billion by 2028. Initially designed for gaming, GPUs have seen a shift toward AI applications, but AMD continues to lag in the gaming sector.
FactSet forecasts a 59% drop in AMD's gaming business revenue in 2024, down to $2.57 billion. Besides GPUs, AMD also manufactures processors for laptops, desktops, and servers, where it competes mainly with Intel. AMD's market share in server CPUs rose nearly 3% year-over-year to 34% in the third quarter, according to market estimates.
