Meta Platforms Inc. (NASDAQ:META) stock fell about 4% on Monday as investors weighed mounting legal risks and questions about the company’s AI strategy. The decline also came as Communication Services ranked as the market’s weakest sector.
The Nasdaq fell 0.14%, while the S&P 500 dropped 0.38%.
California Trial Puts Meta’s Legal Risks In Focus
Meta faces a case brought by 29 state attorneys general. They accuse the company of illegally collecting children’s data and misleading consumers about safety. They also allege that Facebook and Instagram included features designed to encourage addictive behavior among young users.
U.S. District Judge Yvonne Gonzalez Rogers will decide the case. An eight-person advisory jury will also issue a nonbinding verdict.
Meta has said potential damages could reach $1.4 trillion. However, attorneys for the states have cited about $200 billion as a more likely figure, CNBC reported Monday.
The trial follows Meta’s recent losses in New Mexico. A jury there ordered the company to pay $375 million. A judge later directed another $567 million into an abatement fund. Meta plans to appeal.
The states also want Meta to delete certain children’s data and algorithms trained on that information. They are seeking the removal of features they describe as addictive.
Meta disputes the allegations. It has called the claims “unsubstantiated” and the financial demands “vastly disproportionate.”
New Mexico Attorney General Raúl Torrez has warned that a large judgment could affect Meta’s ability to fund future investments. Meta’s AI spending could reach $145 billion this year.
McNamee Questions Meta’s AI Position
The legal uncertainty comes as Elevation Partners’ Roger McNamee questions Meta’s position in the AI race. He called CEO Mark Zuckerberg’s open-source AI vision “science fiction that is untethered from reality.”
Speaking on CNBC, McNamee said Zuckerberg’s recent manifesto aims to create the impression that Meta is well positioned in AI while also improving his reputation.
McNamee also challenged broader assumptions about the AI boom. He urged investors to reconsider whether current large language models can deliver the economic transformation markets expect.
“If I owned the stocks today, I’d be sitting there and asking the question, ‘Are all my assumptions still sound?’” McNamee said. “Because I think a few of them aren’t.”
He argued that large language models rely on historical observations to generate the most likely response. That approach, he said, raises questions about how many economically valuable uses require an “average result.”
Meta Stock Remains Below Key Moving Averages
Meta shares remain under pressure from a technical perspective. The stock trades 4.2% below its 20-day simple moving average and 5.1% below its 50-day average.
It also sits 6.9% below its 100-day average and 9.7% below its 200-day average. In addition, the stock’s MACD remains below its signal line, pointing to weak momentum.
Meta shares have fallen 26.28% over the past 12 months. The stock’s 52-week range is $520.26 to $796.25.
Analysts Remain Bullish
Wall Street remains positive despite the recent weakness. Meta carries a Buy consensus rating and an average price forecast of $767.42.
UBS maintained a Buy rating while lowering its price forecast to $715 on July 30. Baird kept an Outperform rating and cut its forecast to $750. Goldman Sachs maintained a Buy rating and lowered its forecast to $725.
META Price Action
META Price Action: Meta Platforms shares were down 4.11% at $565.63 at the time of publication Monday, according to Benzinga Pro data.
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