Legal risks piling up, AI burning money, Meta's market value evaporates by $280 billion, sparking concerns of tobacco industry-style risks

** At the start of the year, Meta Platforms Inc. still looks like one of the best-performing large-cap technology stocks in the market. But concerns among investors about legal risk and the massive spending on artificial intelligence (AI) are increasingly coming to the surface, ultimately causing the stock to plunge 11% last week.**

** This company, the parent of Facebook and Instagram, is down 17% year-to-date this month, and is on track to post its worst single month since October 2022. Back then, Meta provided a disappointing outlook for revenue, and CEO Mark Zuckerberg urged investors to be patient with the company’s ever-increasing spending on the metaverse.**

** Now, Meta is downplaying the metaverse concept and shifting its focus to artificial intelligence. But the market’s worries that its spending could get out of control have only grown stronger. Moreover, the company’s survival risk is rising as well after a jury in New Mexico found Meta had misled teens in that state about the safety of its social network, and after Meta and Alphabet were found liable in a trial involving social-media addiction. By just March alone, Meta’s market value has already shrunk by $280 billion.**

** Even though many people think it’s still too early to draw conclusions, Wall Street is now trying to assess a possibility: whether social-media companies could face shrinking risks similar to those that the tobacco industry faced after stricter anti-smoking regulations were introduced.**

** Tim Ghriskey, a senior portfolio strategist at Ingalls & Snyder, said: “I don’t necessarily think it’s the same as tobacco, but stranger things have happened.” The firm, which manages about $11 billion in assets, holds Meta stock. Earlier in his career, Ghriskey was responsible for researching the tobacco industry and spent a great deal of time modeling litigation risk.**

** Ghriskey said: “Some might think that to eliminate the negative impact of social media, the only way is to shut down the entire industry. Obviously, that would deal a devastating blow to the company.”**

** In a report to clients dated March 26, Evercore ISI analyst Mark Mahaney said that after the verdict, drawing comparisons between Meta and the tobacco industry has become “a question investors keep asking us.” “Is this Meta’s ‘big tobacco moment’? In other words, is Meta no longer worth investing in now? That possibility exists, but we think it’s unlikely.”**

** In fact, analysts this quarter have become more optimistic about Meta’s long-term outlook. Over the past three months, the market’s general expectations for the company’s 2027 earnings have been raised by 2.4%, while revenue expectations have been raised by 6.4% over the same period.**

** With earnings expectations being raised on top of a decline in the stock price, Meta has become the lowest-valued stock among the “Magnificent Seven.” Its stock price is currently about 16 times expected earnings for the next 12 months, reaching the lowest valuation level since March 2023.**

** Phil DeAngelo, managing director at Focused Wealth Management, said that such a relatively cheap valuation is enough to offset factors that have weighed on the stock price. His firm holds Meta stock.**

** DeAngelo, who helps manage $2.3 billion in assets, said: “So far, the level of penalties isn’t large, and the company can mitigate the issues behind these lawsuits by adjusting new parameters, so I don’t think this will create negative drag the way tobacco did. At the same time, Meta has become extremely attractive, and the acceleration in revenue growth shows that despite the huge scale of spending, it still knows how to turn these investments into returns.”**

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责任编辑：王永生