Just as a helicopter is too heavy to take off, tech companies are ditching everything they don’t deem essential to getting their AI plans off the ground.
Meta plans to cut its Metaverse division’s budget by up to 30%, and is considering layoffs as part of that, BI’s Jyoti Mann and Pranav Dixit write. The decision comes as tech companies seek to cut back on things that aren’t directly focused on gaining an edge in the AI war.
Investors liked the move, and the stock ended the day up almost 3.5%.
For Meta, abandoning the Metaverse has been a long time coming. (In fact we declared it obsolete check notes May 2023. ) The word “Metaverse” was not used once in Meta’s latest earnings call.
This is a stark reversal from when Metaverse became the literal inspiration for a company-wide rebrand from Facebook. But it’s hard to keep insisting on funding something that consumes billions of dollars and doesn’t directly generate significant revenue.
Especially when you need to make room for AI initiatives that cost billions of dollars and don’t yet generate significant revenue directly.
Meta is unlikely to be the last company to trim non-AI fat.
AI projects are very expensive. From hardware to people to power, there doesn’t seem to be a way to do this “cheaply”. Competition is fierce in this field, and even the first movers are feeling the heat.
This is forcing companies to rethink their resource allocation, especially for projects that fail to meet their AI goals.
Even companies focused solely on AI are recalibrating their approach. OpenAI is putting ancillary projects aside to focus solely on enhancing ChatGPT.
Technology companies with lines of business that are already benefiting from the AI boom are at an advantage. Amazon, Google, and Microsoft’s cloud businesses are seeing a surge in AI investment.
But those players aren’t standing still. Microsoft CEO Satya Nadella has appointed new advisors to “reimagine the new economics of AI.”
Next month could be a good indicator of how far tech companies are willing to go to continue realizing the AI dream. Several companies implemented layoffs at the beginning of the year as part of their annual shakedown.
It will be interesting to see where companies draw the line. It’s clear that efforts that are not related to AI and that bring benefits will be targeted, but what about those that are profitable but don’t fit into the company’s future AI vision? How much will the company cut from what it already has? teeth What do we support? Maybe so?
