Alibaba Downsizing Metaverse Unit Amid Strategic Restructuring

Alibaba Group is downsizing its metaverse unit, Yuanjing, as part of a strategic restructuring to enhance efficiency. This move aligns with broader trends in the tech industry, where investments are increasingly shifting from metaverse projects to artificial intelligence (AI).

The restructuring has led to the layoff of dozens of employees at Yuanjing, impacting its operations in Shanghai and Hangzhou. Despite these cuts, the unit will continue focusing on metaverse applications and tools, aiming to deliver metaverse-based services.

Yuanjing was established in 2021 during a surge in metaverse interest, with significant investments and high expectations. However, the current downsizing reflects a recalibration of priorities, as tech giants like Alibaba and Meta shift their focus toward AI development. Notably, Alibaba had previously led a $60 million funding round for the AR glasses maker Nreal, underscoring its commitment to metaverse technologies at the time.

This move follows similar decisions by other tech companies. For instance, Meta Platforms laid off employees from its metaverse division in October 2022, and Baidu has also reduced its metaverse initiatives, focusing more on AI advancements.

Despite these challenges, local governments in China, including Zhejiang province, are still pursuing ambitious metaverse development plans. The evolving landscape will be closely monitored by investors and market participants, who will adapt their strategies based on how these initiatives unfold.