AMD Cuts 4% of Workforce to Focus on Competing In The AI Chip Market

AMD has announced a 4% reduction in its workforce, with layoffs aimed at streamlining the company’s resources toward high-growth areas, particularly in artificial intelligence (AI) chips. The restructuring reflects AMD’s ambition to challenge Nvidia’s stronghold on the AI chip market. As of last year, AMD employed approximately 26,000 people, according to the company’s annual 10-K filing, meaning this reduction impacts around 1,000 employees. An AMD spokesperson stated that the decision aligns resources with "largest growth opportunities” and added, “We are committed to treating impacted employees with respect and helping them through this transition.”

The company, currently the second-largest producer of graphics processing units (GPUs), is pushing to expand its presence in the rapidly evolving AI sector.

Strategic Shift to Capture AI Market Growth

As the AI chip space becomes increasingly competitive, AMD is focusing its efforts on AI hardware for data centers. Its MI300X accelerator, purchased by major tech firms like Meta and Microsoft, is positioned as an alternative to Nvidia’s widely-used AI chips. However, Nvidia continues to dominate the market, holding over 80% market share due to its early software investments that established an ecosystem widely adopted by AI developers, including OpenAI’s ChatGPT.

AMD is setting ambitious targets, expecting $5 billion in AI chip sales in 2024, making up about 20% of its projected revenue for the year. By comparison, Nvidia, which has seen its shares skyrocket by 200% in 2024, is anticipated to generate around $125.9 billion in revenue, a large portion of which stems from AI chip sales. AMD, however, sees long-term potential, projecting the AI chip market to reach $500 billion by 2028.

Challenges in Gaming Segment and Competitive Pressures in AI

Originally known for GPUs in the gaming sector, AMD has seen a downturn in this area. Revenue for AMD’s gaming segment is projected to fall by 59% in 2024, reflecting a shifting focus within the company as it redirects resources toward AI. In addition to GPUs, AMD produces processor chips for computers and servers, where it competes with Intel. The company’s share of server CPU sales has grown, recently capturing 34% of the market, according to Mercury Research.

Despite the anticipated growth, AMD has struggled to match Nvidia’s reach in AI chips, partially due to inventory constraints. AMD will ship an estimated 224,000 GPUs this year, but this volume is insufficient to meet demand from large clients like Microsoft and Meta. Additionally, AMD’s chips face performance challenges in AI training tasks, though the company emphasizes its strength in AI inference, which involves running trained models.

Future AI Products and Competitive Outlook

In an effort to reassure investors, AMD CEO Lisa Su emphasized during the recent Q3 earnings call that the company’s next-generation MI350-series chip is progressing well and is expected to launch in the latter half of 2025. This new chip is projected to deliver AMD’s most substantial performance leap in AI processing to date. Still, financial projections underscore the difficulty of catching Nvidia, with AMD’s 2025 revenue forecast at $32.6 billion—well behind Nvidia’s quarterly revenue of $33 billion, almost entirely from AI chip sales.

Looking Ahead

With layoffs and a focus shift, AMD is betting on a more streamlined approach to capture a slice of the booming AI market. The company's future in AI chips depends on closing the gap with Nvidia, securing inventory for large customers, and delivering competitive technology, such as the upcoming MI350-series. As AMD faces fierce competition, 2025 could be a pivotal year for its AI ambitions, marking a potential turning point if it can gain ground in an increasingly Nvidia-dominated sector.

Editor’s Note: This article was created by Alicia Shapiro, CMO of AiNews.com, with writing, image, and idea-generation support from ChatGPT, an AI assistant. However, the final perspective and editorial choices are solely Alicia Shapiro’s. Special thanks to ChatGPT for assistance with research and editorial support in crafting this article.