Shares of Facebook parent company Meta Platforms fell Monday, pulling back following a big rally for Meta stock that followed the social media giant's second-quarter results. Meta is chasing a $2 trillion market capitalization.
Meta stock is down more than 2% at 765.93 in heavier-than-usual volume on the stock market today. However, shares have regained some ground following steeper losses in the morning. Shares also found support above Meta's 21-day moving average. The decline comes after a mix of weekend news items offered an update on the company's metaverse ambitions, as well as new scrutiny for the tech giant's pricey AI efforts.
On the metaverse front: Meta is planning to launch sales for its first display-equipped smart glasses next month at a lower-than-expected cost of $800, according to a Bloomberg report. Meta was previously expected to charge at least $1,000 for the glasses. But the company is "accepting lower margins to boost demand," according to the Bloomberg report, citing unnamed sources.
Meta's Ray-Ban smart glasses have offered a surprise hit for the company's metaverse-focused Reality Labs division. The new glasses — dubbed Hypernova internally — could offer upgrades over the Ray-Bans, such as a small screen to display apps and alerts within the lenses. The timeline reported by Bloomberg would align with Meta's September annual developer conference, where it has previously launched metaverse products.
Accepting lower margins is a common tactic to boost new products, Bloomberg's report noted. But Meta's Reality Labs division posted a $4.53 billion loss in the second quarter. The division is projected to lose $20 billion total this year, according to FactSet, widening from a $17.7 billion deficit in 2024. Investors may be wary of hearing about the potential for further hits to margins.
Meta AI Policies Face Scrutiny
Meanwhile, Meta's generative artificial intelligence efforts — which are far more popular with investors — are under new scrutiny from lawmakers. Sen. Josh Hawley said late Friday that he would start an investigation into whether Meta's gen AI chatbots pose a threat to children. The announcement followed a Reuters report that Meta had permitted its chatbots to "engage a child in conversations that are romantic or sensual."
A Meta spokesperson told Reuters that the company is revising the internal AI policy document that the report cited. ""The examples and notes in question were and are erroneous and inconsistent with our policies," the company told the news outlet.
Lawmakers have previously challenged Meta's policies for how children can use both Facebook and Instagram.
The Reuters report and news of the probe sparked little concern from investors Friday, with Meta stock closing the day a fraction higher. However, it is not the first time Meta has come under scrutiny for how children interact with its products. More than 40 state attorneys general sued Meta late in 2023, alleging the company's apps include addictive features that are harmful to young users.
Separately, a review by Bloomberg found "persistent flaws" reported by users of the Meta AI app, including users who questions its overall purpose. The Meta AI assistant is a key part of the company's AI efforts, competing against the more established ChatGPT from OpenAI and Google's Gemini.
Meta Stock Up 30% In 2025
Including Monday's pullback, Meta stock has gained 30% so far this year.
With its gains, Meta is approaching a $2 trillion market capitalization, though Monday's action appears set to delay that milestone. Meta's market cap is hovering near $1.92 trillion as of noon Monday.
Meta would join Nvidia, Microsoft, Apple, Alphabet and Amazon as the only companies above that level. Nvidia has a market cap of more than $4 trillion while Microsoft and Apple are each above $3 trillion.
Meta's year-to-date gain is second-best among those tech giants. Nvidia has gained 35%.
Meanwhile, Meta stock has an IBD Composite Rating of 96 out a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. Meta stock is on the IBD Tech Leaders list.
