In a significant shift in strategy, Meta has announced plans to drastically reduce its investments in the metaverse, as Chief Executive Mark Zuckerberg redirects focus towards artificial intelligence (AI). The social media giant, valued at $1.7 trillion, is exploring budget cuts of up to 30% within its metaverse division, which might lead to job losses starting early next year.
The announcement has been received positively by investors who have expressed concerns over Zuckerberg’s prolonged spending on a metaverse initiative that has yet to resonate with consumers and lacks immediate financial returns. Following the news, Meta’s stock experienced a notable increase, rising by as much as 7% at the opening of trading in New York, and maintaining a mid-afternoon rise of 4%, adding approximately $60 billion to the company’s market capitalization.
Affected by the cuts are teams involved in Horizon Worlds, Meta’s social virtual reality platform filled with avatars, as well as those working on its Quest virtual reality headsets. Although these plans, first reported by Bloomberg, are still subject to change, they signal a pronounced shift in priorities for the company.
This announcement follows Zuckerberg’s recent revelation of a new design studio within Reality Labs, Meta’s virtual and augmented reality department, which will focus on developing wearable AI-powered devices such as smart glasses. The company secured the expertise of former Apple design executive Alan Dye to lead this new venture.
Zuckerberg’s push for a metaverse, initiated in 2021 and accompanied by a company rebranding from Facebook to Meta, has faced numerous challenges including technical obstacles, safety concerns, and sluggish consumer interest. These difficulties have led to investor pressure on Zuckerberg to decrease expenditures in this area. Since 2021, Meta’s Reality Labs division has reported losses surpassing $70 billion.
In an effort to connect the metaverse with broader AI objectives, Zuckerberg indicated in April 2023 that advancements in metaverse technologies could benefit AI development. He stated that integrating AI agents would leverage the company’s extensive investments in avatar technology from recent years.
Despite the setbacks in its metaverse ambitions, a promising aspect of Reality Labs includes the success of wearable technology, particularly Meta’s Ray-Ban smart glasses. Zuckerberg has intensified his focus on AI-powered wearables, positing that they have the potential to replace smartphones and play a crucial role in his vision for “superintelligence.”
To bolster its AI efforts, Meta is allocating billions towards recruiting top AI researchers and building the necessary infrastructure to facilitate the development of “personal superintelligence.” This comprehensive strategy encompasses the creation of open-source AI models, chatbots within Meta’s applications, and AI-enhanced glasses.
Over the past year, this strategic overhaul has led to multiple executive reshuffles and layoffs within the company. However, investor sentiment remains cautious, especially following an incident in October when shares plummeted by over 10%, erasing more than $208 billion in market value after Zuckerberg unveiled plans for further aggressive investments in AI for the coming year.
