Meta cuts off Manus from internal systems as China blocks $2 billion AI acquisition deal

After spat with Chinese gov't, Meta cuts AI Manus off from its internal systems and is 'sunsetting' platform, report claims -- Beijing-ordered breakup of $2 billion AI deal begins

Manus staff lost access to Meta's data systems earlier this month. Meta has finished separating its operations from Manus, the Chinese-founded agentic AI startup it acquired for roughly $2 billion in December, Bloomberg reported, citing people familiar with the matter. Manus employees have reportedly been locked out of Meta's internal data systems since the start of the month. Meta staff are now barred from using Manus tools for internal work, and an internal memo viewed by Bloomberg says Meta is "sunsetting" the platform, with existing Manus projects to be migrated onto Meta's own systems. The split is the first concrete step in complying with Beijing's April order to reverse the completed acquisition, right as the startup's three founders attempt to raise around $1 billion to buy their company back. China's National Development and Reform Commission (NDRC) ordered the deal undone in April under its foreign investment security review mechanism, the country's rough equivalent of CFIUS in the U.S. It was the first time Beijing has forcibly reversed a completed cross-border AI acquisition, and the commission asserted jurisdiction despite Manus having moved its headquarters and core team from Beijing to Singapore in mid-2025. The review sharpened in March, when authorities barred co-founders Xiao Hong and Ji Yichao from leaving mainland China, with the order reportedly requiring Manus's Chinese assets to be restored to their pre-acquisition state within weeks. The order extends to AI companies and their engineers the same restrictions Beijing has been increasingly applying to silicon all year. Chinese regulators have held up Nvidia's H200 shipments even after Washington approved them, while DeepSeek launched its 1.6 trillion parameter V4 model on Huawei silicon. Manus drew comparisons to DeepSeek in Chinese state media as a symbol of domestic AI capability, which made its sale to a U.S. hyperscaler a test case Beijing evidently decided it couldn't let stand. A blocked fab or factory sale can simply be reversed by returning equity, equipment, and IP, though: Manu's value sits in its model weights and engineering know-how, both of which have been freely flowing into Meta for the last six months. No ban or firewall can recall what Meta's engineers have already learned from that, and Meta hasn't yet said how it'll demonstrate to the NDRC that Manus's tech is out of its stack. Founders Xiao Hong, Ji Yichao, and Zhang Tao have discussed raising about $1 billion from outside investors to fund a buyback at a valuation at least matching the $2 billion Meta paid, though it remains unclear how far those talks have progressed. Early backers, including Tencent, ZhenFund, and HSG, have already received their proceeds from the sale. Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds.

Meta cuts Manus off from data systems, begins unwinding deal

Meta has cut Manus off from its internal systems and told staff to sunset the platform. The $2 billion acquisition is being dismantled after Beijing ordered it unwound in April, and Manus's founders are trying to raise $1 billion for a buyback. Meta has erected a data firewall between itself and Manus, the Chinese-founded agentic AI service it acquired for $2 billion in December 2025. Since the start of June, Manus and its staff have been barred from accessing Meta's internal data systems, and Meta employees can no longer use Manus tools for internal projects, according to Bloomberg. An internal memo viewed by Bloomberg instructed staff to migrate existing Manus projects onto Meta's own systems and not to start new work on the platform. Meta is "sunsetting" Manus, the memo said. Why the deal is being unwound China's National Development and Reform Commission ordered the deal unwound in April 2026, after a four-month regulatory probe that began almost immediately after the acquisition was announced. The NDRC concluded that the transaction violated foreign investment and technology export rules, even though Manus had relocated its headquarters and key staff from China to Singapore in 2025. The probe escalated in March when Chinese authorities restricted co-founders Xiao Hong and Ji Yichao from leaving the country and summoned them to Beijing for questioning. The intervention sent a clear message to Chinese AI founders: incorporating in Singapore does not put you beyond Beijing's reach. The buyback plan Manus's three founders, Xiao Hong, Ji Yichao, and Zhang Tao, are exploring options to raise approximately $1 billion from external investors to fund a buyback at a valuation matching the $2 billion Meta paid. The founders may contribute their own money to cover the rest, Bloomberg reported last month. If the buyback proceeds, the next step would involve setting Manus up as a Chinese joint venture with those backers, ahead of a potential Hong Kong IPO. It remains unclear whether the fundraising discussions have advanced significantly. What is still connected Despite the operational split, Manus has continued adding features. It has integrated data from Similarweb, added e-commerce functionality from Shopify, and as of this week still gives users the option to connect with Meta's Ads Manager, Instagram, Gmail, and GitHub. Manus staff have moved into Meta's Singapore offices. Investors including Tencent, ZhenFund, and HSG have already received their proceeds from the acquisition, complicating any attempt to fully reverse the transaction. From viral demo to cautionary tale Manus launched in invitation-only beta in March 2025 with a demo video that drew more than one million views in 20 hours, showcasing an autonomous AI agent that could browse the web, write code, manage files, and complete multi-step tasks without human supervision. It was hailed as China's second "DeepSeek moment," a breakthrough that could challenge Silicon Valley's dominance in agentic AI. The entire arc, from viral demo to $2 billion exit to regulatory demolition, took less than a year. China has since formalised tougher outbound-investment rules that give regulators an expanded toolkit for blocking cross-border AI transactions involving technology, talent, or intellectual property with Chinese origin, regardless of where the company is incorporated. The flags The operational split is a step toward unwinding the acquisition, not the unwind itself. The financial mechanics of reversing a completed deal where investors have already been paid out remain unresolved, and the $1 billion fundraise is not yet confirmed. Some Manus features, including connections to Meta's Ads Manager and Instagram, remain active despite the data firewall, raising questions about how complete the separation currently is. Whether Manus can sustain itself as an independent company after losing access to Meta's infrastructure and resources is an open question, particularly if it must restructure as a Chinese joint venture under tighter regulatory oversight.

Meta's Biggest AI Bet Stalled: China Blocks Manus Deal, Forces Strategy Shift

Meta's plans for AI startup Manus have hit a major obstacle after China reportedly blocked the deal. The move has forced changes inside the partnership and raised fresh questions about the future of global AI investments. Meta's effort to strengthen its position in artificial intelligence has faced a roadblock. China has opposed its planned deal involving AI startup Manus. The development has prompted both companies to rethink their acquisition plans, drawing attention across the tech industry. The decision comes at a time when AI companies are racing to secure talent, technology, and computing power. Meta has spent heavily on AI over the past few years, making the reported setback especially notable. The situation also shows how AI is no longer just a business matter. Governments are becoming more involved as advanced AI systems grow in importance.