According to Futurism, Meta is planning major budget cuts—as high as 30%—for the teams behind its Horizon Worlds metaverse platform and Quest VR headsets. These cuts, part of a broader 10% budget reduction, could lead to layoffs starting as soon as January. The move follows staggering losses of over $70 billion in its Reality Labs division since the beginning of 2021. In a telling reaction, Meta’s stock jumped more than 4% after Bloomberg reported the news. Analysts see it as a late but necessary shift, as the company now pivots its astronomical spending toward artificial intelligence, with plans to drop roughly $72 billion on AI this year.
Market Reality Check
Here’s the thing: the market voted, and it voted against legless avatars. That stock jump says everything. Investors have treated the metaverse spend like a multi-year fever dream they desperately wanted Zuckerberg to wake up from. The competition in VR just never materialized at the scale Meta needed to justify this burn. So who wins in this scenario? Honestly, probably Meta’s core business. Every dollar not torched in Horizon Worlds is a dollar that can defend the Facebook and Instagram ad empire from TikTok, or fund that new AI arms race.
But let’s not pretend VR is dead. It’s just not the world-eating platform Meta bet the company on. Apple’s Vision Pro exists in a different, premium universe. Sony’s PlayStation VR2 is a gaming accessory. The consumer market for all-day virtual office meetings and blocky virtual concerts? It basically doesn’t exist. Meta’s cuts are an admission that they were building for a future that isn’t arriving on their timeline, or maybe at all.
The Pivot To AI
So what fills the void? Artificial intelligence. It’s fascinating, and a little cynical, that Meta’s planned $72 billion AI spend this year almost exactly matches the $70+ billion it lost on the metaverse. It’s like swapping one astronomically expensive obsession for another. But the key difference? AI has immediate, obvious applications for their existing business—better ad targeting, content moderation, creator tools. Investors can understand that. It’s a tool for the real world, not a bet on a speculative new one.
The narrative shift is complete. The metaverse was a vision. AI is a utility. And in the harsh, quarterly-results-driven world of public markets, utilities win every time. Zuckerberg isn’t giving up on the metaverse entirely—it’ll linger as a research project—but the era of it being the company’s north star is clearly, decisively over. The money firehose has been redirected.
