What does the empty space in the bamboo stem do?
No, its not xylem. Bamboo is a grass, and the stem (culm) of many grasses are hollow in the middle (see e.g. Grass Structures from Oregon state for some more info).

The exact reason for why Bamboo have hollow stems is most likely due to evolutionary contingencies. However, from a mechanical stability point of view, a hollow stem is much more rigid and stable than a solid (but much thinner) stem composed of the same amount of biomass (Niklas &amp; Spatz, 2012, p. 191ff). So from the perspective of efficiency, the hollow stems of grasses are very useful. The solid node discs found in grass stems (and in other plants with hollow stems) are however really important for increasing overall stability and ability of stems to resist deformations, while only contributing to a very small amount of the total biomass.