Mark Zuckerberg’s AI vision makes Metaverse a slightly easier sell

The chief executive of Meta Platforms kicked off the company’s annual developers conference on Wednesday, showing off its latest headsets that now employ a mix of virtual reality and augmented reality technology. That has been the historic aim of the event, at least since the company once known as Facebook spent $2 billion to acquire VR headset maker Oculus in 2014. But the VR business mostly has been a dud. Meta’s Reality Labs division that includes VR generated just over $2 billion in revenue for the 12 months ended in June—about what the company’s core advertising operation generates every five days.

But the craze over generative artificial intelligence has given Zuckerberg another chance at remaking his company’s image—this time without the awkward name change. Wednesday’s announcements include the company’s digital assistant called Meta AI getting voices licensed from actors such as Awkwafina, John Cena, Judi Dench and Kristen Bell. AI is also being incorporated into the latest hardware: The Meta Ray-Ban smart glasses that were launched late last year, and have actually been selling well, will soon include reminder notifications and the ability to translate conversations in real time.

Those might seem to be modest developments relative to the efforts of Meta’s megacap tech peers. Microsoft, Google and Amazon have been in a mad race for more than a year to roll out new generative AI services for things like internet search and a variety of corporate uses. Apple, meanwhile, has made AI the centerpiece of its new iPhone 16 models that just went on sale last week. The iPhone alone is a massive business that generates more revenue in a given year than Meta’s entire operation.

But Meta still might have an edge in getting generative AI technology in front of a wide base of consumers. Nearly 3.3 billion people across the globe use the company’s apps daily, compared with Apple’s last reported global installed base of 2.2 billion active devices. And many of Meta’s AI tools don’t require any form of buy-in from users, while the bulk of Apple’s users will need to spring for at least an iPhone 15 to be able to use Apple Intelligence when it launches next month.

They don’t seem to be in a rush: The latest iPhones aren’t selling particularly well, at least according to several analysts who have parsed shipping-time data. Apple’s shares have risen less than 3% since the company unveiled its latest iPhones earlier this month and are up less than 18% for the year, lagging behind the S&P 500.

Meta’s shares, by contrast, have soared more than 60% this year. And that is after the stock took a drubbing in April on news that the company was boosting its projected capital expenditures for the year to a level on par with the outlays of much larger rivals Google, Microsoft and Amazon.

That level of spending, and the $16.7 billion annual operating loss for its Reality Labs division, would hardly seem to make the case for an investment darling. But 85% of analysts rate Meta as a buy compared with 78% for Google-parent Alphabet and 68% for Apple, according to FactSet data.

“We continue to see Meta as a top AI play in the consumer Internet sector," Justin Post of BofA Securities wrote in a report last month.

Gil Luria of D.A. Davidson initiated coverage of Meta earlier this month with a buy rating, noting that the company is already seeing benefits from its AI investments in its core advertising business. “This makes it easier to justify not only the investments in AI compute, but also open sourcing them to capture the benefits from the developer community," he wrote.

Zuckerberg no longer needs to bank on the metaverse paying off.

Write to Dan Gallagher at dan.gallagher@wsj.com