Snap spins off its AI video team into a new company called Dotmo to cut costs, while retaining a large equity stake and technology license.

What happened: Snap is separating an internal generative AI video team into an independent company called Dotmo, which will develop AI models for interactive gaming experiences. The new team will consist of current Snap staff leaving to launch the venture. Snap will receive a large equity stake in Dotmo and will license its technology to the new company for gaming and interactive entertainment platforms.

Why it matters: Snap cited the high costs of conducting AI video work internally as a key reason for the spinoff. By spinning out Dotmo, Snap may reduce its financial burden while still maintaining exposure to potential upside through its equity position. This marks Snap's second major spinoff this year, following the earlier separation of Specs, its smart glasses division.

What to watch: Snap's CTO Bobby Murphy will act as lead investor with a significant personal stake in Dotmo, while continuing to work full-time at Snap leading its GenAI research and development. Dotmo may eventually seek outside funding, and could be considered a future partner with Snap if the fit seems right.