Meta’s Strategic Pivot: Shifting Billions from Metaverse to AI

A significant strategic realignment appears to be underway at Meta Platforms. According to market reports, the technology giant is preparing to implement deep budget cuts of up to 30% within its loss-making Reality Labs division, the unit dedicated to virtual reality and Metaverse projects. The objective is to aggressively reallocate these resources toward artificial intelligence development. This potential shift follows years of investor criticism over the immense costs associated with building virtual worlds, raising a pivotal question: can this change in focus sustainably reverse the stock's recent lackluster performance?

Beyond the strategic overhaul, a sudden boardroom departure has captured market attention. Dina Powell McCormick announced her immediate resignation from Meta's board of directors on Friday, having only joined the governing body in April 2025. Although she is expected to maintain an advisory role with the company, her rapid exit prompts questions regarding stability within the supervisory board. The company currently has no plans for a direct replacement.

Analyst Confidence Endures

Despite a year-to-date decline of approximately 3.6%, market analysts maintain an optimistic outlook for the coming months. RBC Capital reaffirmed its "Outperform" rating on Saturday, accompanied by a price target of $810, which implies significant upside potential. For investors, the crucial next step will be the official confirmation of the Reality Labs restructuring, anticipated for early 2026. The focus will be on whether CFO Susan Li can demonstrate in upcoming quarterly reports that the massive AI expenditures are translating into measurable revenue growth within the core advertising business.

Metaverse Ambitions Face Substantial Cuts

The primary catalyst for recent market scrutiny is a proposed strategic U-turn in Meta's hardware operations. Market observers interpret the leaked plans as a direct concession to pressure from Wall Street. Since 2020, Reality Labs has accumulated losses exceeding $60 billion.

Should investors sell immediately? Or is it worth buying Meta?

The contemplated cuts signal a departure from the previous "all-in" Metaverse strategy. The new directive aims to enhance capital efficiency, funneling investment toward the area perceived to hold the greatest immediate growth potential: AI infrastructure. This news initially generated a wave of optimism, even as the share price experienced a slight retreat to €563.20 at the week's close.

Full Steam Ahead on Artificial Intelligence

Behind the scenes, Meta is already developing its next generation of AI products. Reports indicate two new AI models, internally codenamed "Mango" and "Avocado," are nearing completion and slated for release in the first half of 2026. "Mango" is specialized for image and video generation, placing it in direct competition with OpenAI's offerings, while "Avocado" is designed to enhance the logical reasoning capabilities of large language models.

Concurrently, Meta is securing access to external innovation. A planned partnership with a new startup led by departing AI chief Yann LeCun is intended to guarantee access to advanced robotics and AI technology. These investments also explain the persistently high capital expenditure (CapEx) forecasts for 2025, which are projected to flow almost entirely into AI infrastructure.

Key Financial Metrics at a Glance:

• Friday Closing Price: €563.20
• Daily Change: -0.62%
• Year-to-Date (YTD) Performance: -3.59%
• Distance from 52-Week High: -20.45%