Advanced Micro Devices is laying off four percent of its global workforce, or about 1,000 employees, as it directs efforts towards developing AI chips in a bid to compete against industry bellwether Nvidia.

AMD is regarded as the closest rival to Nvidia in the lucrative market for chips that form the brains of complex data centers that can process the large mounds of data used by generative AI technology like OpenAI’s ChatGPT.

“As a part of aligning our resources with our largest growth opportunities, we are taking a number of targeted steps,” an AMD spokesperson told Reuters on Tuesday.

Revenue in AMD’s data center segment, which houses its AI graphics processors, jumped more than two-fold in the September quarter. On the other hand, the personal computer segment grew 29%, while sales in its gaming unit slumped about 69 percent during the period.

Analysts expect the data center unit to grow 98 percent in 2024, outpacing expected total revenue growth of 13 percent, according to an average of estimates compiled by LSEG.

The company has been investing heavily to develop AI chips which command high selling prices and are in high demand among so-called hyperscalers like Microsoft.

AMD plans to start mass production of a new version of its artificial-intelligence chip called the MI325X in the fourth quarter of the year. Ramping up production of AI chips is an expensive undertaking due to constrained manufacturing capacity.

The company’s research and development costs jumped close to nine percent in the third quarter, while its total cost of sales rose by 11 percent.

Shares of AMD have dropped more than three percent so far this year, as the company struggles to live up to investors’ high expectations after Wall Street drove a two-fold surge in its shares last year, betting on the returns linked with AI technology.

© Thomson Reuters 2024

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