Chinese e-commerce giant Alibaba is reportedly scaling down its metaverse operations, joining other tech giants that have reduced resources from the once-hyped sector. 

Dozens of employees at Alibaba’s metaverse division have been axed as the company restructures and aims to improve efficiency, according to the Alibaba-owned South China Morning Post. 

The firm’s Yuanjing metaverse unit has operations in both Shanghai and Hangzhou and was set up by Alibaba in 2021 amid the hype for virtual world platforms and related tech. 

That hype for the once-booming sector has since waned as artificial intelligence has become the latest big thing in tech, demanding more resources and investment from companies aiming to keep up. 

Alibaba reportedly cuts dozens from metaverse unit image 0

Alibaba Cloud’s website highlights four areas of tech focus relating to the metaverse. Source: Alibaba Cloud

The division, which reportedly received “billions of yuan” in investment and previously employed a few hundred workers, will continue to exist, providing metaverse applications, tooling, and services, the report added. 

Alibaba also led a $60 million funding round in Chinese augmented-reality glasses maker Nreal as part of its metaverse ambitions in March 2022. 

Several other major Chinese tech players, including Tencent, ByteDance, and Baidu, also raced to capitalize on the potential of the metaverse sector in a trademark registration frenzy at the time. 

Related: FINRA says rules still apply in the metaverse

The latest downsizing reflects a broader industry trend where major tech companies are shifting focus from metaverse to AI development.

In May 2023, the head of metaverse operations at Baidu left the company after the Chinese search giant pivoted to generative AI development. 

In October 2023, Facebook parent Meta laid off employees from its Reality Labs unit, which develops augmented and virtual reality technologies for the metaverse, according to a Reuters report at the time. 

Additionally, Reality Labs posted an operating loss of $4.4 billion in the third quarter and has had an operating loss of more than $58 billion since 2020.

In February 2023, software giant Microsoft shut down its Industrial Metaverse Core team and reportedly laid off around 100 employees working on the project.

Meanwhile, in March 2023, Disney dissolved its metaverse division with staff cuts as part of a wider restructuring. 

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