Meta Platforms (META) shares fell about 3.4% to $578 on Wednesday as investors weighed fresh privacy concerns in Europe alongside mounting legal challenges in the US, even as some analysts argued the company’s artificial intelligence investments continue to strengthen its core advertising business.
The decline comes after Meta’s recent recovery above $600 lost momentum.
The stock had previously fallen following its second-quarter earnings report as investors questioned the company’s heavy infrastructure spending and the timeline for monetizing its AI investments.
German privacy complaint adds fresh regulatory pressure
Meta faces renewed regulatory scrutiny after German digital rights organization HateAid filed a criminal complaint against the company over its Ray-Ban Meta Wayfarer smart glasses.
The complaint also names units of eyewear maker EssilorLuxottica and several German retailers selling the devices.
HateAid argues the smart glasses could violate German privacy laws governing communication devices capable of recording individuals without their knowledge.
Germany’s Federal Network Agency has previously warned that connected devices capable of covert audio or video recording could be prohibited.
While the regulator said it is monitoring the smart-glasses market, it added that it is not currently conducting a formal investigation.
The complaint represents another potential hurdle for Meta as it seeks to expand its smart glasses business, which the company views as a potential long-term growth opportunity.
US courts allow social media lawsuits to proceed
Meta is also facing legal challenges in the United States after a federal appeals court allowed thousands of lawsuits against Meta, Alphabet’s Google, ByteDance’s TikTok and Snap to continue.
The Ninth US Circuit Court of Appeals rejected attempts by Meta and TikTok to overturn a lower court ruling requiring the companies to face more than 3,000 lawsuits alleging their social media platforms were intentionally designed to keep young users engaged and addicted.
The companies had argued that Section 230 of the Communications Decency Act protected them from liability.
However, the appeals court ruled that the challenge had been brought too early, allowing the broader litigation to move forward.
The court also rejected Meta’s request to delay a trial brought by 29 state attorneys general.
The states allege Meta collected and used children’s data unlawfully, designed its platforms to encourage prolonged use among young users and misled consumers about platform safety.
The latest ruling follows a separate decision by a New Mexico judge ordering Meta to pay $567 million into a teen mental health fund and adopt additional youth safety measures.
AI investments continue to divide investors
Despite the legal and regulatory headwinds, some analysts remain optimistic about Meta’s long-term outlook.
A TipRanks report argued that Meta stock appears undervalued despite investor concerns over the company’s projected $130 billion-$145 billion capital expenditure plans.
The report said “AI is already powering Meta’s growth,” pointing to second-quarter revenue of $60.8 billion, up 28% year over year, while advertising revenue increased 27% to $59.4 billion.
TipRanks also highlighted improving monetization across Meta’s platforms, noting that AI-driven recommendations have increased user engagement and advertising efficiency.
The report cited stronger ad impressions, higher pricing and rapid adoption of AI-powered advertising tools among businesses.
It also pointed to WhatsApp’s paid messaging and subscription services, as well as continued improvements across Facebook and Instagram, arguing that AI investments are beginning to generate measurable business benefits.
While regulatory scrutiny and legal challenges continue to weigh on investor sentiment, the debate surrounding Meta increasingly centers on whether its significant AI spending will produce sufficient long-term returns to justify its elevated capital investment.
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