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Advanced Micro Devices (AMD) is laying off 4% of its workforce, approximately 1,000 employees, as the company realigns its focus towards artificial intelligence (AI) chips. The decision, announced on November 13, comes amid declining demand for gaming processors and an attempt to compete with rivals like Nvidia in the AI sector.
Recent quarterly figures report for the AMD group are strong. However, while the company recorded $6.8 billion in revenue and $771 million in net income, gaming revenues dropped 69% compared to last year. There is a sharp mismatch between AMD’s previous gaming investment and the current interest of the public. With gaming consoles such as PlayStation and Xbox already well-established, demand for AMD’s semi-custom chips used in these systems has dwindled.
Consequently, resources are being refocused toward the development of AI chips. The company hopes to find high returns from its growing data centers. “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%,” an AMD spokesperson told CRN.
This isn’t surprising, given the explosion of demand and usage of AI technology, largely driven by tools like ChatGPT. AMD is likely poised to overtake Nvidia’s lead in this lucrative field. To do so, it plans to ramp up production of AI accelerators like the MI325X chip, albeit at a great expense. This push aligns with AMD’s twofold increase in data center revenue last quarter. Analysts expect the data center segment to grow by 98% in 2024, compared to a 13% rise in total revenue.
Meanwhile, AMD keeps fumbling in the gaming sector. The company reasoned that the drop in gaming chip revenue is because the majority of interested buyers have already purchased AMD-powered consoles. This will likely continue until new hardware hits the market. This struggle has forced AMD to pursue the layoffs. However, unlike Intel’s larger-scale layoffs of around 15,000 workers, AMD is only cutting off areas that no longer align with its future direction.
The layoffs immediately affected the company’s stock, which fell by 2.3% following the announcement. However, AMD’s CEO, Lisa Su, remains confident about the company’s future. She underscored that AI and data centers represent significant growth opportunities. The company expects the market for data center AI accelerators to grow to $500 billion by 2028.
In a competitive industry, AMD’s choice to focus on AI chips reflects both the shifting dynamics in consumer demand and the company’s desire to stay ahead of technological advancements. Whether this gamble will pay off remains to be seen, but the layoffs signal a definitive pivot away from consumer gaming and towards more profitable opportunities in AI.
