AMD lays off 1,000 employees, or 4% of global Workforce, in a bid to compete with Nvidia in AI chip market

AMD announced on Wednesday that it would lay off 4% of its global workforce as the longtime chipmaker sharpened its focus on the fast-growing artificial intelligence chip market, which remains dominated by rival Nvidia.

The layoff announcement comes just a month after AMD unveiled its latest AI chip, the MI325X, in a direct challenge to Nvidia’s dominance in the data center market.

″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 said in a statement. “We are committed to treating impacted employees with respect and helping them through this transition.”

According to a filing with the SEC, AMD had 26,000 employees at the end of last year, which suggests about 1,000 jobs will be affected by the layoffs.

AMD, the second-largest graphics processing unit (GPU) producer after Nvidia, views AI as one of its biggest opportunities. While AMD’s stock is down 5% in 2024, Nvidia’s shares have surged 200%, making Nvidia the most valuable publicly traded semiconductor company worldwide, according to a report from CNBC.

While AMD’s stock has seen only a modest 20% rise this year, Nvidia’s has skyrocketed by over 175%. A successful launch of the MI325X could draw more investor attention, particularly from those looking to diversify their AI bets beyond Nvidia.

One of the challenges AMD faces is Nvidia’s CUDA software, which has become a go-to tool for AI developers, effectively locking them into Nvidia’s ecosystem. In response, AMD has been ramping up efforts on its own software, ROCm, to make it easier for developers to transition to AMD’s hardware.

To gain ground, AMD offers powerful AI accelerators for data centers, such as the MI300X, which companies like Meta and Microsoft have purchased as an alternative to Nvidia systems. Nvidia, however, still controls more than 80% of the AI chip market, largely due to its established software ecosystem used by AI developers, including those behind ChatGPT.

In October, AMD projected $5 billion in AI chip sales for this year, representing around 20% of its total expected revenue of $25.7 billion for 2024, according to FactSet. AMD estimates the AI chip market could reach $500 billion by 2028, yet its current revenue trails Nvidia, which FactSet projects will bring in $125.9 billion in 2024.

Initially designed for gaming, GPUs are seeing reduced demand in that segment. AMD’s gaming revenue is expected to decline by 59% in 2024, falling to $2.57 billion, according to FactSet.

Beyond AI and gaming, AMD also produces processors for laptops, desktops, and servers, competing with Intel. AMD’s share of the server CPU market rose to 34% in the third quarter, up nearly 3% year over year, according to Mercury Research.

The layoffs reflect AMD’s move to position itself as a stronger competitor in AI, aiming to capture a larger slice of this rapidly expanding market.