Meta Platforms (META) and Google’s (GOOG) YouTube lost key legal battles. The jury found that the firms were liable for teens having an addiction to their social networking product. This opens the door for more litigation and more settlement payments.
For 30 years, internet firms benefited from the law that separated them from online publishers. But the latest court cases are changing that key separation. After Meta and Alphabet lost their cases, Snap (SNAP) and TikTok are at risk of litigation.
Shares of Alphabet peaked in early February. The stock risked falling below $270, led by President Trump's posts expressing an interest in ending the war. Aside from market-moving posts triggering a rebound, risks persist.
Meta Platforms traded as low as $479.80 before closing at $574.46 last week. The owner of Facebook, WhatsApp, and Instagram needs minimal regulations to grow its advertising business. Meta needs the cash flow to fund its expensive AI hardware purchases. Even though it is behind AI firms like OpenAI’s ChatGPT, Microsoft (MSFT), Anthropic, and Amazon (AMZN), cutting its spending is not an option.
Meta needs relaxed regulations on child safety, for example. The bad news is that the winds shifted. The courts want social networking firms to have more accountability for their product. That risks hurting Meta’s bottom line. As a result, watch out for META stock re-testing a 52-week low.
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