AMD to cut 4% of workforce, affecting approximately 1,000 jobs

Advanced Micro Devices, Inc. (AMD) stated on November 13, that it will lay off 4 per cent of its global staff as the established computer chipmaker focuses on gaining a stronger foothold in the rapidly growing artificial intelligence chip space dominated by Nvidia, according to a detailed report by CNBC.

″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 per cent,” an AMD representative said in a statement. “We are committed to treating impacted employees with respect and helping them through this transition.”

AMD has 26,000 employees on its rolls

AMD had 26,000 employees at the end of last year, according to a US Securities and Exchange Commission filing.

AMD currently is the second-biggest producer of graphics processing units, or GPUs, behind Nvidia. The company has said AI represents one of its largest growth opportunities.

AMD stock is down 5 per cent in 2024 while Nvidia shares have rallied by 200 per cent, making it the most valuable publicly traded company in the world. Nvidia currently boasts a market capitalization of more than $3 trillion, whereas AMD has a market capitalization of $233 billion.

Main objective of the company

AMD produces powerful artificial intelligence (AI) accelerators for data centers, including the MI300X, which companies such as Meta and Microsoft purchase as an alternative to Nvidia-based systems.

Still, Nvidia dominates the market for powerful AI chips, with over 80 per cent market share, partially because it developed the core software that AI engineers use to develop programs such as OpenAI’s ChatGPT, the CNBC report added further.

In October AMD stated that it expects $5 billion in AI chip sales this year, about a fifth of the $25.7 billion in total sales FactSet projects for AMD’s 2024.

The company further anticipates that the total market for AI chips will be $500 billion by 2028, but its total sales are currently dwarfed by Nvidia, which FactSet expects to post $125.9 billion in revenue for calendar year 2024. The gap between Nvidia and AMD is startling, with AMD needing to do a lot of catch up.

Further, GPUs were originally developed for gaming, which is lagging at AMD. AMD’s gaming segment is expected to decline 59 per cent in 2024 to $2.57 billion in revenue, according to FactSet.

AMD also assembles processor chips for laptops, desktops and servers. Intel is its main competition. Its share of server CPU sales rose nearly 3 per cent on an annual basis in the third quarter to 34 per cent, according to Mercury Research.

Market participants and global investors will closely follow these developments in the chip industry. It will guide them in taking informed investment calls going ahead.