Meta Platforms, Inc (NASDAQ:META) stock gained over 1% on Wednesday as traders balance mounting legal risks against a broadly constructive tape, with the S&P 500 up 0.4% and the Communication Services sector gaining 1.1%.
A California trial is putting Meta’s legal exposure back in focus after 29 state attorneys general accused the company of illegally collecting children’s data and misleading consumers about safety, with U.S. District Judge Yvonne Gonzalez Rogers set to decide the case alongside a nonbinding advisory jury verdict. Meta has said potential damages could reach $1.4 trillion.
Experts See Meta Trial Threatening Both Its Social Media Model and AI Ambitions
Meta’s social media addiction trial could create risks that extend well beyond immediate financial penalties, with three experts warning that the case may pressure its advertising model, complicate its AI transition and expose the company to larger legal challenges over time.
Munster Warns AI Agents Could Magnify Future Legal Risks
Deepwater Asset Management Managing Partner Gene Munster views the current litigation as an early stage of a much broader legal challenge for Meta. He roughly estimates the company could face about $25 billion in fines over five years, but believes Meta could absorb those costs once its heavy capital-spending cycle moderates and annual cash flow reaches an estimated $40 billion to $60 billion.
Munster sees a bigger long-term threat in CEO Mark Zuckerberg’s shift toward AI agents and "superbots." He believes these systems could wield significantly more influence over users, including teenagers, potentially exposing Meta to much larger lawsuits in the future.
He also sees algorithm regulation as a risk, although he expects Meta to increasingly replace its existing social media model with an agent-based approach over the next two to three years.
Allensworth Sees Meta More Likely to Lose
Vanderbilt Law School professor Rebecca Haw Allensworth told CNBC that she believes Meta is more likely than not to lose the current trial, pointing partly to its difficulties in similar cases.
Allensworth said evidence that Meta designed products to maximize engagement, combined with limited age and identity verification, could work against the company.
She believes Meta could still prevail on appeal, where Section 230 protections and First Amendment arguments may become important and could potentially reach the Supreme Court.
Her larger concern centers on Meta’s business model. Because engagement drives advertising revenue, Allensworth believes restrictions on features such as infinite scrolling could reduce profitability and reshape how social media companies monetize their platforms.
Patel Sees a Microsoft-Style Distraction During the AI Shift
The Verge Editor-in-Chief Nilay Patel told CNBC that the case could become Meta’s version of Microsoft Corp’s (NASDAQ:MSFT) major antitrust battle, forcing the company to defend its core business just as it tries to navigate a major technology transition.
Patel sees restrictions on infinite scrolling or younger users’ access to Instagram as potentially damaging to engagement and advertising revenue. At the same time, Zuckerberg is investing heavily in AI, personal superintelligence and potentially computing services.
Patel also believes Meta’s reputation for extensive data collection could complicate its AI ambitions, particularly as it develops products such as smart glasses that collect information from users and their surroundings. In his view, Meta must manage mounting regulatory pressure while simultaneously trying to establish itself as an AI leader.
Top ETF Exposure
- First Trust Dow Jones Internet Index Fund (NYSE: FDN ): 9.46% Weight
- Natixis Loomis Sayles Focused Growth ETF (NYSE: LSGR ): 7.99% Weight
- Invesco Nasdaq Internet ETF (NASDAQ: PNQI ): 7.66% Weight
Significance: Because META carries such a heavy weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock.
Price Action
META Stock Price Activity: Meta Platforms shares were up 1.37% at $551.12 on Wednesday, according to Benzinga Pro data.
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