Alibaba Scales Down Metaverse Division Amid Shift Toward AI Focus

Alibaba, the Chinese e-commerce powerhouse, is reportedly paring back its metaverse operations, joining a wave of major tech firms reshaping their priorities in response to growing demand for artificial intelligence (AI). According to the South China Morning Post, Alibaba’s restructuring has led to layoffs in its Yuanjing metaverse division, which operates in both Shanghai and Hangzhou.

This unit, launched in 2021 during a high point of metaverse enthusiasm, attracted significant investment — estimated in the billions of yuan — and employed several hundred workers. However, as AI has claimed a dominant role in tech innovation, companies like Alibaba have begun reallocating resources accordingly.

Industry-wide Reassessment of Metaverse Ambitions

Although Alibaba’s metaverse division will continue to offer virtual world applications and related services, its workforce reduction underscores a broader trend of companies stepping back from metaverse ambitions. This shift, experts suggest, reflects how companies are reassessing strategic priorities in a tech landscape increasingly centered on AI advancements.

Alibaba’s recent cutbacks align with similar moves by other tech giants that once heavily invested in virtual and augmented reality projects. Earlier this year, Meta laid off a portion of its Reality Labs staff, which specializes in VR and AR technologies aimed at developing the metaverse. Reality Labs reported an operating loss of $4.4 billion in Q3 2023, with losses surpassing $58 billion since 2020.

Other industry players are also reconsidering their investments in virtual reality spaces. In February 2023, Microsoft dissolved its Industrial Metaverse Core team, laying off around 100 employees. Disney similarly scaled back, dissolving its metaverse division altogether as part of a larger corporate restructuring. Within China, Baidu’s head of metaverse operations exited the company in May 2023 as it, too, pivoted towards generative AI.

A Broader Shift Toward AI

As the metaverse hype fades, the spotlight has shifted to AI, which is rapidly evolving and spurring new levels of corporate investment. Alibaba, for instance, has continued to explore innovations in AI that could have a broader impact across its platforms, potentially offering more immediate returns than virtual reality.

The reduction in Alibaba’s metaverse workforce reflects a pragmatic response to the changing tech landscape. While its Yuanjing unit remains operational, the scaled-back operations signal Alibaba’s recalibration toward technologies that may yield greater growth potential in the coming years, positioning AI as the new frontier of digital innovation.