Meta, the social media powerhouse, is reportedly contemplating a reduction of up to 30% in its metaverse expenditure, reallocating funds towards virtual reality glasses and artificial intelligence.
No conclusive decisions have been reached yet, but potential budget cuts and layoffs are under consideration for Meta’s Reality Labs division, particularly targeting its virtual reality unit, which consumes a significant portion of metaverse funding, as reported by Bloomberg and The New York Times on Thursday.
The anticipated budget cuts could be implemented as soon as January, but Meta plans to redirect resources towards a Reality Labs unit focused on developing augmented reality glasses.
Wall Street responded favorably to the news, with shares in Meta (META) initially surging over 5% upon market opening on Thursday, eventually stabilizing around the $661 mark for a daily gain of 3.4%.
In 2021, Meta rebranded from Facebook, aiming to develop a metaverse. The company has invested billions in research and development of virtual reality technology, an interest that appears to be waning as tech companies pivot towards the excitement surrounding AI.
Competition around metaverse cools
Meta is reducing its virtual reality unit’s budget as part of its annual budget planning for 2026, partly due to the less competitive landscape surrounding the anticipated rush for metaverse technology.
Sources disclosed to Bloomberg and The New York Times that in 2021, both Apple and Google were vigorously developing competing virtual reality devices, but their momentum has since diminished, relieving the pressure on Meta executives to advance their efforts.
Nonetheless, other companies continue to work on launching metaverses, with the AI startup Infinite Reality acquiring the music-pirating-turned-streaming service Napster in March, intending to create a music-oriented metaverse.
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In the meantime, DTTM Operations, a company owned by Donald Trump, filed for trademarks in February related to a metaverse and NFT marketplace based on the US president’s brand.
Meta all in on virtual reality glasses
While Meta may be stepping back from the metaverse, CEO Mark Zuckerberg stated in a post on his X-like Threads platform on Wednesday that the company is launching a new creative studio within Reality Labs, concentrating on “design, fashion, and technology.”
“We’re entering a new era where AI glasses and other devices will transform our interactions with technology and each other,” he noted.
“The potential is vast, but what is paramount is ensuring these experiences feel organic and genuinely centered around individuals,” Zuckerberg remarked. “With this new studio, our aim is to make every interaction intentional, intuitive, and designed to benefit people.”
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