Shares of Meta Platforms fell 7% Thursday following a pair of landmark court rulings against the company and news of another delay to its flagship AI model, adding to a difficult stretch for a stock that has underperformed its Big Tech peers over the past year.
A California jury on Wednesday found Meta and Google liable for harming a woman’s mental health through addictive design features on their platforms. The ruling came one day after a New Mexico jury ordered Meta to pay $375 million in damages for enabling child exploitation on its platforms, in violation of state consumer protection laws. Legal experts told the Wall Street Journal the rulings could trigger years of mass litigation similar to the legal campaigns against the tobacco industry in the 1990s. Timothy Edgar, a Harvard Law School lecturer, told CNBC the verdicts represent a “major watershed event” that signals a significant shift in how Americans view Big Tech.
The court losses compounded existing pressure on the company. Two weeks earlier, the New York Times reported that Meta had delayed the release of Avocado, its foundational AI model, to at least May after it failed to outperform rival models from Google, OpenAI and Anthropic in benchmark tests. Meta’s shares fell 3.8% the day that report was published.
Around the same time, Meta said it would close access to Horizon Worlds on its virtual reality headsets from June 15, signaling a retreat from the metaverse project around which it rebranded the entire company in 2021. The company later walked back the decision partially. The metaverse cost Meta approximately $80 billion and never found a mass audience, with monthly active users falling below 200,000 against a target of 500,000 by the end of 2022, according to the Journal.
Despite those setbacks, Meta has continued to escalate its AI ambitions. In January the company said it expected to spend up to $135 billion in 2026 — nearly double the $72 billion it spent last year — and announced plans to invest $600 billion in AI infrastructure in the United States through 2028. The company also invested $14.3 billion in Scale AI, bringing founder Alexandr Wang on as its new chief AI officer. However, several prominent AI researchers have since departed, including Yann LeCun, who led Meta’s AI research division for more than a decade.
Meta’s core advertising business remains strong despite the turbulence. The company generated $196.1 billion in advertising revenue last year, a 22% increase over the prior year, driven by its Facebook and Instagram platforms. Ad impressions grew 12% and daily active users rose 7% in December.
Meta’s shares have declined 9.4% over the past year, the worst performance among the group of technology stocks known as the Magnificent Seven.
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