Meta Stock Jumps on Metaverse Budget Cuts, Shifts Focus to AI

Meta Platforms Inc. (NASDAQ: META) saw its stock price surge following reports of a significant reduction in its metaverse budget, signaling a potential strategic shift toward artificial intelligence (AI). The move was positively received by markets, which has been reflected in the recent trading activity.

Meta's stock experienced an increase of 4.25%, reaching $666.77 through the first hour of trading, adding to the 11.2% year-to-date gain. The jump followed reports that the company is planning to cut its metaverse budget by as much as 30% for the upcoming fiscal year.

The proposed budget cuts are part of Meta's annual planning for 2026 and primarily affect the company's virtual worlds product, Meta Horizon Worlds, and its Quest virtual reality unit. Discussions regarding the cuts reportedly occurred during meetings at CEO Mark Zuckerberg's compound in Hawaii, where executives were asked to identify potential cost reductions of up to 10% across the board. Since its rebranding from Facebook to Meta in 2021, the company has invested heavily in its augmented reality division, with total expenditures exceeding $60 billion since 2020. The potential layoffs, expected as early as January, are a direct consequence of these cost-cutting measures.

Alongside the reduction in metaverse investment, Meta is actively reallocating resources toward artificial intelligence. The company recently launched a Superintelligence Lab and made a substantial $14.3 billion investment for a 49% stake in Scale AI. This pivot suggests a strategic commitment to remaining competitive in the rapidly evolving AI landscape, aligning with broader industry trends and market demands.

The combination of reduced metaverse spending and increased investment in AI has seemingly bolstered investor confidence. The stock's positive trajectory indicates that markets view this strategic realignment as a prudent step toward improving the company's financial performance and focusing on areas with greater potential for near-term growth and profitability.