In October 2021, when Facebook was still riding high, Mark Zuckerberg changed the company’s name to Meta, signaling his new focus on “the metaverse” — a nascent blend of virtual reality and social networking. In a letter to shareholders, he said achieving this vision would be expensive but worthwhile: “Our hope is that within the next decade, the metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce and support jobs for millions of creators and developers.”

I’m agnostic about this claim. It’s quite possible that the metaverse will pay off in a big way, though it may not.

It’s a big risk. But that’s what tech growth-stock investing is all about: placing a risky bet in the hope that it leads to exponential, immensely rewarding growth. Sometimes, such bets pay off.

But the market environment for most of this year hasn’t favored risky ventures like this. To the contrary, it has, for the most part, been a decidedly “risk off” year — with money flowing out of speculative bets like the metaverse and cryptocurrencies into safe niches like short-term Treasury bills and money market funds.

Recall that as recently as September 2021, when tech stocks were still in vogue, the market valued Facebook at more than $1 trillion and ranked it as the sixth-most valuable publicly traded firm in the world.

But as skeptical reviews of Meta’s version of immersive reality spread, and the enormous costs of the experiment became evident, the market turned against the company. Apple’s tighter privacy rules didn’t help. They limited Meta’s ability to sell targeted ads that run on iPhones, and constrained its revenue. In one single day in February, Meta’s shares lost $230 billion — more, by some accounts, than any company had ever shed in one day. The flogging has continued. After fresh revelations on Oct. 26 of disappointing earnings and ever-bigger expenditures on the metaverse, the stock plummeted again. It is now worth a bit more than $255 billion on the stock market — about a quarter of its value last year. Meta announced large-scale layoffs on Wednesday, an act of fiscal discipline that may stem the rout of its stock but that leaves its future open to question.

A great deal of damage has already been done, at Meta and other tech companies. Hiring has slowed, and many companies, including Lyft, Stripe, Redfin, Snap and Twitter, under its new owner, Elon Musk, have been laying off employees.

Jeff Sommer

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