Artificial intelligence has been a real hype topic on the stock market since #Microsoft and #Alphabet came up with their chatbots #chatgpt and Bard. Now Meta also wants to jump on this trend with its in-house AI language model #LLaMA. It is just one of many investments that are intended to build up a virtual world.
However, Marc Zuckerberg’s vision is costing Meta a lot of money: around a fifth of its total investment the company will continue to put into developing a #metaverse in the coming year. The goal is ambitious. Virtual reality (VR) and augmented reality (AR) are set to become the next big computing platform and Meta will one day lead it.
The division that develops VR and AR products at Meta is called Reality Labs. In the fourth quarter of 2022 alone, it posted an operating loss of about 4.3 billion dollars. Losses would continue to “grow significantly” in 2023, Zuckerberg told investors after announcing the latest quarterly figures. And: The investments are not expected to pay off until the end of the decade. No wonder, then, that voices of investors grew louder, calling for a drastic reduction of investments in Metaverse products – especially against the background that Meta’s core business is also doing less well: Early last year, the Metaverse’s largest social network, Facebook, lost users for the first time and revenue, which is mainly generated by advertising, declined. This did not leave the share price unscathed either: It plummeted by around 60 percent in 2022.
In November 2022, Mark Zuckerberg announced cost-cutting measures and mass layoffs of 11,000 employees. The share price development since the beginning of the year shows that this is paying off: Meta shares have risen by more than 50 percent since the beginning of the year. Above all, the quarterly figures and the proclamation of 2023 as the “Year of Efficiency” had recently accelerated the rally. Overall, costs are to be reduced by five billion dollars to 89-95 billion dollars by 2023. Capital expenditure will be reduced by 4 billion to 30-33 billion dollars. And an announced share buyback programme caused the share price to rise as well.
In addition to the restructuring programme, Meta’s innovative strength could also give the share a long-term boost. The expensive investments are reflected in their patent and invention activity: Meta Platforms, Inc. is ranked first in the Quant IP Competitive Technology Benchmarking and scores especially with the size of its patent portfolio. The average Quant IP quality rating of the company’s patents is AA, which means that Meta Platforms, Inc.’s patents are on average better than 81.4% of the comparable patents of competitors.
Conclusion: Meta is in a challenging phase of its corporate history and at the same time shows impressive innovative strength, which can pay off for courageous investors with staying power.