Why Meta Stock Is Sliding Today and What Wall Street Sees Next – August 18

Meta (NASDAQ:META) stock is falling around 4% on Tuesday as investors confront a new legal threat at a time when the company is spending heavily on AI. A closely watched trial involving 29 U.S. states began in California federal court today, with the states accusing Meta of designing Facebook and Instagram features that are addictive and harmful to children. The case could expose Meta to substantial financial penalties while forcing changes to how its platforms operate.

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The potential financial exposure gives investors good reason to follow the proceedings closely. Potential damages could reach as high as $1.4 trillion, although the attorneys general have not publicly disclosed the amount they ultimately intend to seek. The states are pursuing age-verification requirements, removal of infinite scrolling, and other changes affecting Facebook and Instagram. CEO Mark Zuckerberg and Instagram chief Adam Mosseri are expected to testify during the trial, which is scheduled to run for about six weeks.

The courtroom battle comes when investors are scrutinizing Meta’s spending more than ever, with much of the concern surrounding the price of its aggressive expansion into AI infrastructure. Capital expenditures reached $31.1 billion during the second quarter, while free cash flow plunged 91% from $8.55 billion one year earlier to only $784 million. Management recently lifted the lower end of its 2026 capital-spending outlook from $125 billion to $130 billion, leaving the full-year range at $130 billion to $145 billion.

That combination leaves investors with several important developments to watch over the coming months. Progress in the California trial could provide greater clarity regarding possible financial penalties or required changes to Meta’s social-media platforms. At the same time, upcoming quarterly results will offer another chance to see whether rising AI investment can support faster advertising growth, stronger engagement, and improved cash generation over time.

Wall Street remains highly optimistic about META despite those near-term concerns. The stock earns a Strong Buy rating thanks to 38 Buy recommendations, easily beating 5 Holds. The average 12-month price target stands at $752.18, suggesting 37% upside from current levels. (See META stock forecast)