Meta’s Strategic Pivot: AI Investments Take Priority Over Metaverse Spending

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Meta Platforms Inc. is executing a significant strategic shift, moving its investment focus from the virtual world of the Metaverse toward tangible artificial intelligence products. This realignment was underscored last Friday by two major announcements: the acquisition of an AI wearable startup and a series of content licensing deals, even as plans emerge to substantially reduce spending in its immersive technology division.

The company confirmed its purchase of Limitless, a startup specializing in AI-powered wearable devices. Known for its "Pendant" recording device, Limitless will be folded into Meta's Reality Labs division. Dan Siroker, co-founder and CEO of Limitless, stated that the team will now focus on developing AI wearables for Meta's ecosystem. Consequently, the standalone "Rewind" app will be discontinued, and the sale of independent hardware products will cease.

Simultaneously, Meta unveiled multi-year licensing agreements with several major news publishers, including USA Today, People Magazine, CNN, and Fox News. These partnerships are designed to integrate real-time news and archival content into the AI assistants powering Facebook, Instagram, and WhatsApp. A primary objective is to minimize AI "hallucinations"—incorrect or fabricated responses—by grounding the technology in verified journalistic sources. These moves position Meta in direct competition with rivals like Google and OpenAI, who are also aggressively pursuing content deals to train their models.

Metaverse Budget Faces Deep Cuts

In a parallel development, Meta is preparing to slash the budget for its Metaverse unit, which encompasses Horizon Worlds and the Quest VR hardware business, by approximately 30% for 2026. Internal discussions suggest that job cuts within the division could occur as early as January. This decisive action aims to curb a major source of operational losses; the Reality Labs segment is estimated to have lost around $18 billion this year alone.

Investor reaction to the cost-control measures has been positive. The market interprets Meta's moves as a disciplined approach to rein in expenditures and concentrate resources on more immediately promising and potentially profitable areas like AI.

Analyst Perspectives and Pending Developments

Market analysts have endorsed the strategic tightening. Mizuho Securities reaffirmed its "Outperform" rating on Meta's stock, maintaining a price target of $815 and praising the company's budgetary discipline. Evercore ISI highlighted the significant monetization potential of WhatsApp, suggesting it could evolve into a $40 billion business by 2030.

Looking ahead, the formal confirmation of the 2026 budget is anticipated in the coming week. Additionally, the European Commission is reportedly preparing an antitrust investigation into Meta's integration of AI features within WhatsApp. Meta's shares closed Friday's trading session at $661.73, holding just above the $660 threshold.