Tech stocks tumble after Meta and Alphabet lose child safety lawsuit

Tech stocks faced sharp declines on March 26 after a Los Angeles jury ruled against Meta and Alphabet in a child safety case. The verdict accused both companies of negligence over addictive platforms, triggering a sell-off. Meanwhile, Alphabet's earlier gains from AI progress and a legal win in an antitrust case were overshadowed by the latest setback.

The jury's decision hit Meta hardest, with its stock plunging nearly 8%—its worst drop in months. Alphabet's GOOG shares also fell over 3%, pushing its year-to-date losses past 10% and close to bear market levels. Despite the correction, the stock still trades at a forward price-to-earnings ratio of just under 25, above its historical average.

The ruling could lead to more lawsuits, particularly around AI chatbots and platform addiction. Alphabet announced plans to appeal, arguing that YouTube operates as a streaming service, not social media. The case adds to broader concerns about teen social media use, with Australia already banning under-16s from platforms and other nations considering similar steps. Elsewhere, the EU launched a child safety investigation into Snap, causing its stock to tumble by double digits. No new global laws restricting under-16 access have emerged since 2023, but regulatory pressure is growing. Earlier in 2025, Alphabet had seen gains from its Gemini 3 AI advancements and a US Department of Justice antitrust victory. These positives now face fresh challenges as legal risks mount.

The verdict against Meta and Alphabet raises legal and financial risks for both companies. Further lawsuits may follow, targeting AI tools and platform design. Meanwhile, regulatory scrutiny over child safety is intensifying, with more countries reviewing social media restrictions.