New York, Feb 4, 2026, 10:50 (EST) — Regular session
- Shares of Meta dropped roughly 1.7% in early trading amid lawmakers’ efforts to tighten advertising regulations
- U.S. senators have introduced the “SCAM Act,” aiming to compel platforms to verify advertisers, backed by enforcement from the FTC
- India’s highest court also cautioned that WhatsApp might face restrictions on how it shares user data within Meta
Meta Platforms shares dropped 1.7% to $679.86 Wednesday morning, extending a volatile stretch for the Facebook and Instagram parent. The selloff followed a bipartisan Senate bill proposal aimed at cracking down on scam ads. The legislation would force social media companies to verify advertisers and give enforcement powers to the Federal Trade Commission and state attorneys general. (Reuters)
The bill, dubbed the Safeguarding Consumers from Advertising Misconduct Act — or the SCAM Act — hits a nerve with investors wary of swift market moves. It targets the very engine of the system: ads sold en masse, typically to small businesses that prioritize speed over red tape.
The timing is notable, coming as the market has adopted a “guilty until proven innocent” stance toward big tech whenever growth might be squeezed—be it from regulation, ad demand, or the expenses tied to developing artificial intelligence. For Meta, this is crucial since ad revenue remains its lifeblood, despite the current focus on “AI.”
Pressure isn’t only building in the U.S. On Tuesday, India’s Supreme Court signaled it might reinstate a ban on WhatsApp sharing user data with other Meta companies. Two lawyers in court described the app’s privacy policy as “very cleverly designed to mislead users.” India represents Meta’s largest market by user count. WhatsApp has warned that a ban there could force it to halt or reverse certain features. (Reuters)
The broader market hasn’t lent any support. A selloff sweeping through software and data stocks is driven by worries that emerging AI tools could erode pricing power in tech segments once considered untouchable just a year ago. “We are now in an environment where the sector isn’t just guilty until proven innocent but is now being sentenced before trial,” said J.P. Morgan analyst Toby Ogg. (Reuters)
Wall Street showed jitters on that front. The S&P 500 dropped 0.84% Tuesday, while the Nasdaq slipped 1.43% amid concerns over AI-driven competition and its potential impact on tech profit margins. “Many areas, especially around AI, are priced for perfection,” said John Campbell, senior portfolio manager at Allspring Global Investments. (Reuters)
Meta enters this period with a key concern: spending. The company raised its 2026 capital expenditure forecast last week, now expecting $115 billion to $135 billion as it pursues what CEO Mark Zuckerberg dubbed “personal superintelligence.” “This is going to be a big year,” Zuckerberg told analysts on the call. (Reuters)
This matters because stricter ad regulations don’t just lead to worse headlines. They also bring added friction when onboarding advertisers, increased screening expenses, and greater legal risks if a problematic ad slips past — all as investors watch closely to see if AI-driven budgets can pay off quickly enough.
Traders face a key practical issue: how much of this will actually become law, and on what timeline. Bills often start out clean but can end up rewritten, narrowed, or stuck in limbo. Meanwhile, court battles can drag on without impacting near-term revenue.
The downside is clear. Stricter U.S. enforcement combined with a fresh crackdown in India could pinch Meta on both fronts — its ad revenue and the data usage that powers ad targeting — dealing a blow to sentiment just as the market grows jittery over big tech risks.
Investors are turning to megacap earnings for hints on ad demand and AI spending control. Alphabet reports after the close, followed by Amazon on Thursday. Meanwhile, markets await a clear date for the delayed U.S. labor-market data release. (Reuters)
