Alibaba Scales Down Metaverse Division amid Shift to AI
Chinese e-commerce leader Alibaba reportedly scaled down its metaverse operations on Monday in light of a trend among big tech companies to pivot toward artificial intelligence as the industry’s new focus. It reassigned its resources in a manner befitting the waning fascination with the metaverse.
Layoffs and Restructuring at Alibaba’s Yuanjing Unit
In a report, the South China Morning Post owned by Alibaba added that the company laid off dozens of its Yuanjing metaverse unit staff in Shanghai and Hangzhou. Established in 2021 to build virtual worlds, the initial force behind Yuanjing was driven by high investor interest. Despite these recent cuts, Alibaba’s Yuanjing division will continue to offer tools, applications, and services related to metaverses with a lean team.
Investments and Shift from Hype to AI
Early investments by Alibaba included a $60 million funding round in Nreal, a Chinese company behind augmented-reality glasses, in a sign of the tech giant’s early exuberance over the metaverse. But with breakthroughs in AI stealing the limelight, more resources are shifting toward AI, with less focus on the metaverse.
Broader Trend Among Tech Giants
Downsizing is typical for Alibaba these days, as the company follows the general trend in the industry. Several tech giants, including Tencent, ByteDance, and Baidu, have done the same readjustments. In 2023, the head of Baidu’s metaverse operations left the company amid a strategic shift of the business toward developing generative AI. Similarly, layoffs hit Meta’s Reality Labs unit in October 2023 as financial losses reportedly topped $58 billion since 2020.
Industry Reallocations Reflect Market Evolution
Note that Alibaba’s recent restructuring is not an isolated case; Microsoft axed its Industrial Metaverse Core team at the beginning of 2023, laying off 100 workers, while Disney dissolved its metaverse division in a wider cost-cutting exercise. Their collective move marks an industrywide reassessment in view of the fact that AI promises more opportunities for revenues compared with the hype surrounding the metaverse, which has now been deflated.
Conclusion: The New Reality for Metaverse and AI
As technology giants move investments from virtual worlds to AI, Alibaba’s downsizing is the latest chapter in how attention has evolved for the tech industry.
