Mark Zuckerberg is shifting Meta’s (META) spending priorities as the company accelerates its push into artificial intelligence, according to a new breakdown from a top Wall Street analyst.
In a new CNBC interview, Gil Luria, managing director and head of technology research at D.A. Davidson, says Meta established Reality Labs because CEO Mark Zuckerberg wants to own the next generation of AR/VR hardware and leave competitors out of the mix.
But Luria says the metaverse project has been a money guzzler for the social media giant, and now Zuckerberg sees a new race he wants to dominate.
“If they shut down the Reality Labs business, earnings would go up by about 25%. They lost $18 billion last year. And let’s not forget, the business is there for a reason. Mark Zuckerberg wants to own the next platform. The next hardware platform, in his eyes, will be a combination of glasses and goggles, not a handset. And he doesn’t want that to be owned by Apple and Google anymore because he has to pay them 30% off the top.
That’s why he’s been investing so much over the years in Reality Labs. But what’s happened is he’s realized that AI is much further down the road than the shift to the hardware platform. So he would rather invest in winning in AI and building data centers to support his research and better frontier models and better chat than invest in the hardware platform, which may take longer to play out.”
Luria’s comments come as Meta surged about 3.5% on Thursday after news emerged that the firm is slashing budgets in its metaverse business by as much as 30%.
The analyst believes that Meta will still refine its consumer devices even as resources shift, but the strategy comes down to choosing where each dollar delivers the most value.
“That doesn’t mean we are not going to get better Ray-Ban glasses and Oakleys than the display glasses. It just means that he needs to shift some of those resources to AI. Because AI is incredibly competitive with Google, with OpenAI, with Anthropic, and to some extent with Amazon, Microsoft, and many Chinese players. So that’s what he’s doing. He’s moving chips from Reality Labs to the AI investment.”
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