Advanced Micro Devices, Inc. (AMD, Financial) has announced plans to reduce its global workforce by approximately 4%, equating to around 1,000 positions. The company has not specified which departments will be affected by these layoffs. AMD emphasizes that this decision is not due to financial struggles but rather a strategic move to concentrate resources on higher-margin products, especially in artificial intelligence (AI) and data center operations.
Although AMD's share price has dropped over 17% in the past month, and down 5.5% for the year, the company continues to place significant investments in AI chip development. In contrast, NVIDIA has seen a nearly 200% increase in stock value this year. Despite being the second-largest global GPU manufacturer after NVIDIA, AMD is working to expand its footprint in the AI chip market, where NVIDIA currently dominates nearly 90% of the market share.
AMD recently reported a 9% increase in R&D spending and an 11% rise in the cost of sales as part of its Q3 2024 financial results. This is driven by the successful launch of their AI chips, such as the MI300X series, which have fueled growth in its data center business. In the third quarter, revenue for AMD’s data center segment grew by 122%, contributing significantly to its overall income.
The company's AI chip sales are anticipated to reach $5 billion in 2024, representing about one-fifth of its total projected sales. By 2028, the global AI chip market is expected to reach $500 billion. However, increasing production is challenging due to limited advanced wafer manufacturing capacity and the high costs involved.
AMD's third-quarter earnings reported revenues of $6.819 billion, an 18% increase year-over-year, and a net profit of $771 million, a rise of 158%. However, concerns over its fourth-quarter outlook have affected its stock performance. AMD’s data center revenue has doubled for two consecutive quarters, showcasing significant growth potential amid competitive pressures from NVIDIA and the developing demands of AI model developers.
