Meta’s Strategic Pivot: From Virtual Worlds to AI Power Demands

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In a significant strategic reversal, Meta Platforms Inc. is fundamentally redirecting its corporate focus. The company's once-grandiose ambitions for the Metaverse and virtual reality are being sharply curtailed through layoffs and studio closures. Instead, the tech giant is placing a massive, concentrated bet on artificial intelligence. The underlying message is clear: the voracious energy appetite of AI data centers now takes precedence over building immersive virtual environments.

This aggressive shift towards AI is fueling capital investment to unprecedented levels. Having invested nearly $40 billion in 2024, Meta's forecast for 2025 points to expenditures of up to $72 billion. Management has even signaled the potential for capital spending (Capex) to surpass the $100 billion mark in 2026. In practical terms, almost the entire operational cash flow from the previous year is currently being channeled into infrastructure expansion. This enormous capital requirement has prompted caution on Wall Street. Meta shares are down approximately 4.5% year-to-date, trading at $620.80, which is notably below their 52-week high of $708.00.

Securing a Nuclear-Powered Foundation

To support this AI drive, Meta is addressing the colossal computational power demand with an unprecedented move into the energy market. The company has signed 20-year power purchase agreements, positioning it as one of the most significant corporate consumers of nuclear energy in U.S. history. The goal is to ensure a stable power supply for expanding AI data centers, such as the "Prometheus" supercluster in Ohio.

Key partnerships have been formed to deliver up to 6.6 gigawatts of capacity by 2035:
* Vistra will supply over 2.1 gigawatts from existing facilities in Ohio and Pennsylvania.
* TerraPower is receiving funding for up to eight modern "Natrium" reactors.
* Oklo is developing new capacity, potentially coming online by 2030.

These long-term contracts solidify Meta's intent to lock down the physical infrastructure necessary for the ongoing AI race.

Reality Labs Faces Deep Cuts

This strategic refocus is being financed, in part, by severe cutbacks within the company's troubled division. At Reality Labs, the unit responsible for virtual reality and the Metaverse, approximately 10% of the workforce—more than 1,000 employees—are being laid off. Teams working on Quest headsets and the Horizon Worlds social network are primarily affected.

The restructuring also involves the closure of several studios, including Armature and Twisted Pixel. The rationale for this full-scale retreat is found in the financials: since late 2020, the division has accumulated over $70 billion in losses. In the third quarter of 2025 alone, it reported a $4.4 billion loss on revenue of $470 million. Internal resources are now being shifted away from VR projects toward more successful products like the Ray-Ban Meta smart glasses.

The competition with rivals like Google and OpenAI remains intense. Meta aims to release its next major AI model, codenamed "Avocado," in the first quarter of 2026. Whether this strategic realignment will ultimately convince investors will become clearer at the next key milestone: the company's quarterly earnings report on January 27, 2026.