The move signals another shift for the AI startup after Mostaque's departure as chief executive and member of the company's board, in the face of stiff competition from firms like ChatGPT-maker OpenAI and French startup Mistral.

Mostaque stepped down from the board of the company, which makes the Stable Diffusion image-generation tool, in March, to pursue decentralized AI.

"These decisions have not been taken lightly and they are intended to right-size parts of the business and focus our operations, which is critical to setting us on a more sustainable path," Interim co-CEOs Shan Shan Wong and Christian Laforte said in an internal memo to employees.

The company, which has also released AI models to generate audio and video using text prompts, said last October that it had nearly 200 employees around the world.

The employees affected by the layoffs will be informed individually and the U.K.-based company will hold a regular townhall on Thursday, the memo said.

However, the number of staffers to be laid off was not disclosed.

Stability AI counts venture capital firm Lightspeed Venture Partners, actor Ashton Kutcher's Sound Ventures, investment management firm Coatue and chipmaker Intel as investors, according to data firms Crunchbase and Pitchbook.

The British firm made its Stable Diffusion 3 model available to developers on Wednesday through an application programming interface.

(Reporting by Akash Sriram in Bengaluru; Editing by Pooja Desai)

By Akash Sriram