Meta’s AI Focus Leads to Further Layoffs: Investors React With Mixed Sentiment
Tech Giants on US Stock Market | Image: Michael M. Santiago/Getty Images
Key Takeaways
- Meta shares showed slight recovery amid layoffs and AI launches.
- The tech giant recently announced it is shutting the Workplace vertical.
- Meta, Google, and Microsoft earnings had an AI focus.
In a striking divergence, tech giants Meta, Microsoft, and Google have showcased varying impacts of their artificial intelligence (AI) strategies on their financial performances.
As Meta faces a sharp drop in investor confidence due to its increased spending on AI, Microsoft and Google are reaping substantial rewards from their AI investments, beating earnings expectations.
The AI Investment Impact on Meta
Between May 10 and May 15, Meta stocks increased by under 1%, rising from $470.83 to $473.53, as per Google Finance.
The price action reflects a slight positive sentiment in the market over the last five days. However, Meta’s stock has declined by over 5%, dropping from $500.23 to $474.83 in one month. The decrease indicates a broader concern among investors.
Recently, Meta announced that its communications vertical, Workplace, will close in 2026. The tech giant said that users can continue using Workplace until August 31, 2025. However, user access ends on June 1, 2026, as the company moves to focus on AI.
In March, Meta announced plans to layoff 10,000 employees, after already laying off approximately 11,000 employees towards the end of 2023.
In April, Meta, the parent company of Facebook and Instagram, took a hit in its share price, wiping around $190b off its market value. The development happened shortly after CEO Mark Zuckerberg indicated that the company’s expenditure on AI would need to increase.
While the CEO has been pinning hopes on AI and metaverse since the company’s rebranding, investors were not convinced.
On May 13, reports indicated that Meta is exploring the development of AI-powered earphones equipped with cameras.
Microsoft, Google’s AI Approach
Microsoft reported an exceptional financial performance despite heavy investments in AI in Q1 2024. Microsoft announced a 20% surge in cloud computing revenue, thanks in part to its strategic AI investments.
Microsoft’s CEO, Satya Nadella, emphasized how AI tools are transforming business outcomes across various industries, marking a new era of AI-driven innovation. Recently, Microsoft committed €4b ( around $4.3b) to developing data centers and an AI hub in France.
The plan includes building a new data center in eastern France and expanding existing facilities in other regions.
Google’s Exceptional Performance
In Q1 2024, Google reported revenues of $80.5b. The figure marked a 15% increase from 2023.
During the earnings call, CEO Sundar Pichai also reportedly praised AI as a transformative force, describing it as a “once-in-a-generation opportunity.” Google has been aggressive in embedding AI technology across its various business segments, a strategy that has paid off.
In May, Google is also launching an AI-powered search experience called AI Overviews. Announced earlier in 2024, the feature aims to handle complex queries more effectively.
Tech Giants Leverage AI
Meta‘s stock price recovery in the past week could be on the back of new AI launches and better relocation of resources.
However, the overall reaction from investors in the month has been mixed. Meta’s increased AI focus after subsequent layoffs still reflects the uncertainty surrounding the company’s strategic shift.
While Meta’s stock showed a slight recovery in the short term, the overall decline may indicate those concerns. The closure of Workplace and the planned layoffs indicate a reallocation of resources towards AI, a move that has yet to fully convince investors.
Meanwhile, competitors Microsoft and Google are also leveraging their AI investments.
Microsoft’s expansion into new AI hubs and data centers in Europe, alongside Google’s aggressive AI integration across its business segments, are competitive strategies.
For Meta to regain investor confidence and enhance its market performance, it must deliver solid financial results in Q2 2024 and demonstrate the tangible benefits of its AI and metaverse investments.
