Metaverse funding plummets as investors favor generative AI

Investors appear to be over the metaverse with funding at roughly a quarter of what it was from a year ago, according to Pitchbook data.

Why it matters: Generative AI has in many ways replaced metaverse as the new investment darling.

• Per Alphasense, 63 earnings call transcripts have mentioned "metaverse" in the first quarter of 2023, about 27% of the mentions from a year ago, when 234 transcripts mentioned "metaverse."

The big picture: Through March 16 of last year, companies that played in the metaverse or web3 space had raised nearly $2 billion in funding. So far this year, metaverse and web3 companies have raised $586.7 million.

• When you look at fundraising for generative AI companies, however, they are eerily inverse: Through March 16, 2022, that space saw $612.8 million in funding. This year, it's up to $2.3 billion.

What we're watching: Meta and its chief executive Mark Zuckerberg have been one of the biggest promoters of the metaverse, even changing the company's name in 2021 to reflect that commitment.

• But the metaverse has largely been a digital money pit. The company's Reality Labs division reported losses of $13.7 billion and $10.2 billion in 2022 and 2021, respectively.
• Meta lost more than 70% of its value last year, making it one of the worst performers in the S&P 500.

• In announcing layoffs earlier this week, Zuckerberg said the company will put AI at the forefront and appeared to push the metaverse to the backburner.
• "Our single largest investment is in advancing AI and building it into every one of our products. We have the infrastructure to do this at unprecedented scale and I think the experiences it enables will be amazing. Our leading work building the metaverse and shaping the next generation of computing platforms also remains central to defining the future of social connection."