‘shows weak hands for Meta’

Meta Platforms Inc (NASDAQ: META), on Friday, signed a multi-year agreement with Qualcomm Inc (NASDAQ: QCOM) to develop customised virtual-reality chipsets. The stock is down 3.0% at the time of writing.

Dan Ives reacts to the news on CNBC

Per the agreement, Meta will use the custom Snapdragon XR platform on its future “Quest” products to deliver a premium experience of the “metaverse”.

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The announcement confirms that Meta does not yet have the in-house expertise needed to build its own chip. Doubling down on a partner it’s been working with over the past seven years, though, seems like a fair strategy to “accelerate a fully realised metaverse”.

Discussing the news on CNBC’s “The Exchange”, Wedbush Securities’ Dan Ives said:

I think it’s a step in the right direction but not being exclusive is significant. It’s contrary to what Apple, Google and everyone else is doing with their own chips. I think it just shows kind of weak hands for Meta.

Meta to unveil a new VR headset next month

Meta Platforms is expected to launch a new VR headset in October. Its current “Quest 2” is powered by the Qualcomm Snapdragon XR2 chipset.

Details including the length and financial terms of the deal are yet to be known. Ives added:

This reinforces the Street’s view that the company’s metaverse strategy is going to be a lot of challenges ahead. It’s going to be a lot of twists and turns and this does not send the signal the Street wants.

In its latest reported quarter, Meta had $2.80 billion in loss from “Reality Labs” – its metaverse-focused business that includes the VR headsets.

Wall Street still recommends that you buy Meta stock as it has upside to $217 on average.