Metaverse in Decline or Evolution? Investors Pivot as AI Steals the Spotlight

Public interest and funding for the metaverse have collapsed, with experts citing AI’s rise and unrealistic expectations. Yet strong holders and builders believe the story isn’t over.

Once hailed as the next frontier of the internet, the metaverse now faces its most sobering reality check yet. Meta’s massive $46 billion investment, NFT-fueled hype, and immersive experiences promised a new era of digital existence. But fast-forward to 2025, and trading volumes, sales, and user interest have plummeted to all-time lows, signaling a shift in sentiment.

In 2021, Mark Zuckerberg’s announcement of Facebook’s transformation into “Meta” sparked a wave of enthusiasm across industries. Virtual concerts, immersive art shows, and digital cities sprang up as developers, brands, and investors poured billions into building the virtual world. Yet by 2024, that capital has all but evaporated.

Data from DappRadar shows metaverse NFT trading volume in 2024 dropped 80%, while sales plunged 71% from the previous year. Even top projects like Decentraland (MANA), The Sandbox (SAND), and Axie Infinity (AXS) saw their tokens fall over 95% from all-time highs. Daily active users dipped below 5,000 on major platforms despite millions in venture capital.

So, what went wrong?

According to Irina Karagyaur, metaverse contributor to the UN’s ITU, the rise of generative AI stole the metaverse’s thunder. While the metaverse demanded expensive gear and infrastructure, AI tools like ChatGPT, Midjourney, and DALL·E offered low-cost, high-impact utility to consumers and businesses alike. As a result, venture capital reallocated resources away from metaverse innovation and into AI solutions promising real-time ROI.

Herman Narula, CEO of Improbable, agreed that AI’s sudden momentum turned attention away from immersive virtual worlds. “AI became the next big thing,” he said, adding that early metaverse versions under-delivered and were often closed environments with limited interaction.

Yet, not all signals are bearish. Glassnode’s latest on-chain analysis revealed that while prices collapsed, long-term believers are quietly accumulating. Strong hands continue to concentrate holdings of MANA, SAND, and AXS around key psychological support zones, reflecting a belief that the sector remains undervalued.

Charu Sethi, a Web3 expert from Polkadot, noted that the original metaverse hype lacked sustainable user models. “NFT land grabs and high-cost VR gear alienated mainstream users,” she said. Apple’s $3,500 Vision Pro and Meta’s $500 Quest 3 headsets further deepened the accessibility divide.

But Sethi and others believe this is merely a reset, not a funeral. With new use cases emerging, like Siemens and NVIDIA’s industrial digital twins or Roblox and Fortnite’s community-driven ecosystems, the metaverse is transitioning from spectacle to substance.

Kim Currier of the Decentraland Foundation believes that AI and metaverse technologies can evolve together. “AI can make experiences more dynamic and meaningful,” she said, noting that the future lies in human-centric, co-created virtual spaces—not in corporate-controlled escapism.

And despite Meta’s $17.7 billion loss from its Reality Labs division in 2024, projects like Mocaverse and Pixels are still gaining traction, proving that innovation hasn’t completely flatlined.

In this bear market, opportunists are exiting—and builders are stepping in.

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