(CNN) Roughly a year and a half after Facebook renamed itself “Meta” and said it would go all-in on building a future version of the Internet called the metaverse, the tech giant now says its top investment priority will be advances in artificial intelligence.
In a letter to staff on Tuesday, CEO Mark Zuckerberg announced plans to cut another 10,000 jobs in the coming months and doubled down on his new focus on “efficiency” for the company. The shift to efficiency, first announced last month in Meta’s quarterly earnings report, comes after years of heavy investment in growth, including in areas with unproven potential like virtual reality.
Now Zuckerberg says the company will focus mostly on cutting costs and streamlining projects. Building the metaverse “remains central to defining the future of social connections,” Zuckerberg wrote, but that’s not where Meta will invest most of its capital.
“Our biggest investment is in advancing AI and building it into every single one of our products,” Zuckerberg said Tuesday. He gave a nod to how AI tools can help users of his apps express themselves and “discover new content,” but also said the new AI tools can be used to increase internal efficiency by helping ” engineers to write better code faster.”
The comments come after what the chief executive described as a “humbling wake-up call” last year as “the global economy changed, competitive pressures increased and our growth slowed significantly”.
Meta and its predecessor Facebook have been involved in AI research for years, but the remarks come amid heightened AI frenzy in the tech world that began in late November when Microsoft-backed OpenAI publicly released ChatGPT. The technology quickly went viral for its ability to generate compelling, human-sounding responses to user prompts, and then set off an apparent AI arms race among tech companies. Microsoft announced in early February that it was incorporating the technology behind ChatGPT into its Bing search engine. A day before Microsoft’s announcement, Google unveiled its own AI-powered tool called Bard. And not to be outdone, Meta announced late last month that it was forming a “top-level product group” to “drive” the company’s work on AI tools.
“I really think it’s good to focus on AI,” Ali Mogharabi, senior equity analyst at Morningstar, told CNN of Zuckerberg’s comments. Mogarabi said Meta’s investment in AI “has benefits on both ends” because it can improve the efficiency of engineers building products and because incorporating AI features into Meta’s suite of applications will potentially create more time for user engagement , which can then drive advertising revenue.
And in the long term, Mogharabi said, “A lot of the AI investments and a lot of the improvements that come from those AI investments can actually be applicable to the whole metaverse project.”
But Zuckerberg’s emphasis on investing in AI and using the buzzing technology’s tools to make the company more efficient and boost its bottom line is also “what shareholders and the market want to hear,” Mogharabi said. Many investors had previously seized on the company’s ambitions and spending on the metaverse. In 2022, Meta lost more than $13.7 billion in its “Reality Labs” unit, which houses its metauniverse efforts.
And investors seem to welcome Zuckerberg’s shift in focus from the metaverse to efficiency. After taking a beating in 2022, Meta shares have jumped more than 50% year-to-date.
Angelo Zino, senior equity analyst at CFRA Research, said Tuesday that the second round of layoffs at Meta “officially makes us believe that Mark Zuckerberg has completely shifted gears, changing the company’s narrative to one that focuses on efficiency, instead of looking to develop the metaverse at all costs.”