American fabless semiconductor company, Advanced Micro Devices (AMD.O) has announced a 4% reduction in its global workforce, impacting approximately 1,000 employees. The layoffs come as the company redirects resources towards its AI chip development to compete more aggressively with Nvidia (NVDA.O), the current industry leader. The decision follows a trend seen earlier this year when Intel, another major processor manufacturer, announced a 10% global workforce reduction.

The news of AMD's layoffs surfaced shortly after the company reported mixed results for the third quarter on October 30. While AMD's revenue increased 18% year-over-year to $6.82 billion—exceeding analyst expectations and hitting a new record—forecasts for Q4 and AI chip sales fell short, leading to a 7.6% drop in the company's stock during after-hours trading. An AMD spokesperson confirmed the layoffs to Wccftech, citing the need to align resources with the company's biggest growth opportunities.

AMD's data center segment, which includes its AI graphics processors, saw a dramatic 122% revenue increase, driven by heightened demand for AI solutions. However, its gaming unit experienced a 69% decline during the same period, highlighting the shift in focus towards AI and data center growth.

To strengthen its AI strategy, AMD is planning to mass-produce a new AI chip, the MI325X, in the fourth quarter. This push into AI is accompanied by a significant rise in research and development expenses, which surged nearly 9% in Q3, alongside an 11% increase in total cost of sales.

In recent months, AMD has also made two substantial acquisitions. In July, the company announced the $665 million cash purchase of Silo AI, Europe's largest private AI lab. This acquisition is expected to be completed in the second half of 2024. In August, AMD secured a $4.9 billion cash-and-stock deal to acquire ZT Systems, a leading provider of AI infrastructure and hyperscale computing. The transaction includes up to $400 million in contingent payments based on post-closing milestones.

Despite financial pressures and lowered forecasts, AMD remains committed to growing its presence in the AI market. As a part of this strategy, the company aims to reduce costs through layoffs while continuing its aggressive investment in AI chip technology.

AMD shares have struggled this year, down over 3% as investors await signs of stronger AI returns. The company hopes that its restructuring efforts, along with the expansion into AI and recent acquisitions, will position it to challenge Nvidia's dominance in the lucrative AI chip market.