:max_bytes(150000):strip_icc()/GettyImages-2173569212-37dcc6c660254ae4be9305b11ce175e4.jpg "Meta’s Metaverse May Be Shrinking. Investors Are Happy and the Stock Is Surging.")
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Key Takeaways
- Meta is reportedly looking to slash spending on the “metaverse,” the tech giant’s suite of augmented reality hardware and software products.
- The company’s push into the metaverse was the inspiration for its name change from Facebook four years ago. However, investors have increasingly questioned whether the massive spending is paying off.
Shares of Meta Platforms (META) surged Thursday following a report that the company is looking to significantly cut spending on its “metaverse” projects next year.
Bloomberg reported that CEO Mark Zuckerberg has requested that executives find at least 10% in budget cuts across the company for next year, with cuts as high as 30% in the metaverse departments.
Shares were up 4% in recent trading. The stock has gained 14% since the start of the year, lagging the performance of the benchmark S&P 500 index.
Why This Matters to Investors
Meta and other big tech companies have looked to cut costs in various ways in the last few years as their plans to spend hundreds of billions on artificial intelligence have grown. Several companies, including Meta, have cut jobs as a way to save money they now plan to use on building infrastructure for AI.
For years, Zuckerberg has called the metaverse the future of the company, and it was the inspiration for the company’s new name when it changed from Facebook in 2021. However, some investors and analysts have called for the company to stop spending billions on the project because of a lack of progress in sales or interest from consumers.
Citing unnamed sources familiar with the talks, Bloomberg reported that executives have been asked to cut more metaverse spending because of a lack of competition from other tech companies. The cuts are reportedly expected to hit the virtual reality segment of Meta’s operations hardest, and could include layoffs as early as January, though the report noted that the decisions aren’t finalized.
Meta did not immediately respond to a request for comment on the reported cuts.
Separately Thursday, the European Commission said it will evaluate whether Meta’s new policy potentially blocking AI companies from being able to reach users in the European Union directly through WhatsApp violates competition law by making Meta’s own AI chatbot, Meta AI, the only available option.
A WhatsApp spokesperson told Investopedia that the Commission’s claims are “baseless,” and that the policy change is being made because AI companies operating their chatbot services on WhatsApp strains the platform’s infrastructure. “Even still, the AI space is highly competitive and people have access to the services of their choice in any number of ways, including app stores, search engines, email services, partnership integrations, and operating systems,” the spokesperson said.
