A.I., Crypto & Tech Stocks

Investors are closely watching the controversial child privacy lawsuit against Meta Platforms, the parent company of Facebook and Instagram. Last week, opening arguments began in a case brought by a group of 29 states.

The states allege that Meta violated a federal child privacy law, multiple consumer protection statutes, and deliberately designed its products to foster addictive behavior among teenagers and younger users.

Attorneys for Meta have indicated the company could face liability of as much as $1.4 trillion—nearly equal to its entire market value at recent levels. Lawyers representing the states have suggested a more realistic figure closer to $200 billion. While the potential monetary penalty is substantial, many market observers believe the greater risk lies in possible court-ordered changes to Meta’s core products.

Analysts note that remedies under discussion could include limits on features such as infinite scroll and modifications to the recommendation algorithms that keep users engaged. These tools have been central to Meta’s ability to increase time spent on its apps and, by extension, sell more advertising. “They’re talking about eliminating things like infinite scroll [and] changing the algorithms. These are things that are key to how social media products work,” said Gil Luria, head of technology research at DA Davidson. He added that infinite scroll significantly boosted user retention and advertising inventory.

Options markets reflect elevated uncertainty. Pricing implies a potential $30 move in Meta shares through the end of August—roughly 5%—and as much as a $55 move, or about 10%, through the end of September. In midday trading on Tuesday, the stock was down approximately 3%.

Trading professionals caution against reacting to every development. “I would be careful as a retail trader to make a move [based] on every twist and turn in the trial,” said JJ Kinahan, senior vice president at Cboe Global Markets. He advised investors to consider whether they remain comfortable holding the stock given the expected volatility.

Some portfolio managers are taking a more cautious stance. Paul Meeks, managing director at Freedom Capital Markets, recommended staying on the sidelines for now. He cited both the legal overhang and ongoing questions about Meta’s heavy spending on artificial intelligence, describing the AI investments as a potential source of “profitless prosperity” that may weigh on the shares independently of the lawsuit.

Wall Street trading desks, meanwhile, are preparing to respond to headlines. A recent note from JPMorgan traders urged clients to “keep paying attention to these headlines,” describing the case as significant. Strategists point out that any meaningful curtailment of Meta’s data practices or algorithmic tools could affect future revenue more than a one-time settlement or judgment. Mike Khouw of Tidal Financial Group noted that the financial impact of restricted activities could ultimately exceed the size of any monetary award.

Former Justice Department antitrust official Jonathan Kanter highlighted the broader implications of the remedies being sought. States are asking the court to require Meta to delete data allegedly collected from children unlawfully and to eliminate models trained on that data. Such measures, he said, could prove transformative both for this case and for future actions involving companies that build advanced AI systems.

The trial introduces a period of heightened uncertainty for Meta shareholders. While the company has the financial resources to absorb a large settlement, forced changes to product design or data usage could alter the economics of its advertising business. Investors will be monitoring daily developments for clues about the scope of potential remedies and their long-term effect on Meta’s ability to monetize user attention. Until clearer signals emerge from the courtroom, volatility is likely to remain elevated.

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