Shares in Meta Platforms stock (META) rose on Thursday after reports emerged that the company is making major cuts to its Metaverse efforts. Per a Bloomberg report, CEO Mark Zuckerberg is looking to reduce the budget for the metaverse unit and move funding over to the company’s AI and smart glasses initiatives. The report sent shares up by nearly 4%.
The move wouldn’t be a surprise, as Meta has put its foot to the gas in the AI race. The Facebook developer has made cuts to staff to fund its AI efforts, as well as invested billions into new AI data centers nationwide. However, Meta has yet to confirm any cuts to its Metaverse efforts.
While a poor tech stock market has sent shares down in the last 30 days, the company has seen strong growth powered by its AI investments. The lessening fears around AI have helped fuel META to a 5% rally this month, after being down by as much as 20%. Wall Street experts suggest the AI bubble is more of an “air pocket”, implying a bit safer situation.
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Furthermore, while worry about Meta’s spending is understandable in light of its metaverse failures, Meta’s AI spending has been paying off. The company is using its Llama models to improve its content recommendation algorithms, which keeps users on its apps longer and leads to more ads being served per user. At the same time, it’s also using AI to help advertising create better campaigns and improve targeting.
META stock is currently trading in the middle of its 52-week range and below its 200-day simple moving average. The stock is currently trading at a P/E multiple of 25.9 and a P/EBIT multiple of 17.8. It has also provided a median return of 74.5% within a year following sharp declines since 2010. CNN analysts are also bullish, with the majority of analysts surveyed calling META a buy.