Advanced Micro Devices (AMD) has announced it will reduce its global workforce by approximately 4%, which equates to around 1,000 employees, as part of its strategy to sharpen its focus on artificial intelligence (AI) chip development. This move positions AMD to more effectively compete with Nvidia (NVDA), which currently leads the market for chips that power data centers critical for AI technologies like ChatGPT from OpenAI.
An AMD spokesperson stated, “As part of aligning our resources with our largest growth opportunities, we are taking a number of targeted steps.” This realignment reflects AMD’s commitment to capitalize on the booming demand for AI solutions.
In the fiscal quarter ending September, AMD’s data center segment, which includes its AI graphics processors, experienced a revenue surge of over 100%. Conversely, the company’s other sectors showed mixed results; the personal computer division saw a 29% growth, while the gaming segment suffered a significant drop of about 69%.
Looking ahead, analysts are optimistic about AMD’s data center unit, forecasting a growth rate of 98% for 2024, which significantly outstrips the expected total revenue increase of 13% for the company. This optimism stems from AMD’s aggressive investment in AI, especially with the upcoming mass production of its new AI chip, the MI325X, set to begin in the fourth quarter of this year.
However, this pivot towards AI chip production comes at a considerable cost. AMD’s research and development expenses increased by nearly 9% in the third quarter, with the total cost of sales rising by 11%. These investments are necessary to meet the high demand and high selling prices of AI chips, particularly from hyperscalers like Microsoft (MSFT).
Despite these strategic moves, AMD’s stock has seen a decline of 4.9% year-to-date. This dip can be attributed to the high expectations set by investors following a strong surge in share value last year, driven by Wall Street’s enthusiasm for AI-related returns.
Price Action: As of press time, AMD is changing hands at $140.05, down about 2.50% intraday.
h/t Bloomberg
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