Meta Weaponizes Its $18B Settlement Against TikTok

Your Daily Market Update in 10 Minutes. My name is Zayd Admani and today is Friday, August 28th. In today's episode, we'll preview Fed Chair Kevin Warsh's big Jackson Hole speech this morning. We'll also tell you about Meta's $18 billion settlement and the changes coming to their apps and why the company is now pressuring TikTok and YouTube to make the same changes for teens. Then stick around to the end of the show to find out which reality TV star made the Time's list of most influential people in AI over Jensen Huang. We got a great show for you today, let's go. Stocks rallied on Thursday and it was NVIDIA basically carrying the entire market. The S&P 500 climbed 0.7% while the NASDAQ jumped 1.6% thanks to NVIDIA's earnings which gave investors a reason to pile back into the AI trade. We recapped NVIDIA's earnings in detail on yesterday's show so definitely check that out if you missed it. But yeah, NVIDIA stock had a huge day on Thursday, jumping 8.7% which added $442 billion in market cap to the company. That is the second largest one-day increase in value for any company in history, trailing only Microsoft's $450 billion gain earlier this month. What's interesting is that tech was the only sector in the S&P to finish higher yesterday. Everything else was in the red and I think it's because investors were selling their other stocks to rotate back into AI names. So we'll see if this rally in AI stocks continues. For now though, the attention shifts from NVIDIA to the Federal Reserve. The annual Jackson Hole Symposium is underway in Wyoming and Fed Chair Kevin Walsh will deliver his first Jackson Hole speech this morning at 10 a.m. Eastern. This is going to be an important speech because ever since Kevin Walsh took over as Fed Chair earlier this year, he hasn't provided clear policy guidance regarding interest rates and markets don't like being left in the dark. There is a case for the Fed to hike interest rates. In fact, some Fed governors voted to hike rates at the last meeting because inflation is still running above the Fed's 2% target. Right now, the market is pricing in a 36% chance of a rate hike at the September meeting. Personally, I don't think we're going to see a rate hike at the September meeting but we'll see if Kevin Walsh provides some clarity today. Plus, I wonder if Kevin Walsh is going to talk about the bond market chaos happening with Treasury yields spiking in recent weeks. So I'll be tuning into the speech this morning. I'll recap what Kevin Walsh says on Monday's show. Historically, Jackson Hole speeches don't usually move the markets much. According to Bloomberg, the S&P has gained just 0.4% on average in the week following the speech. This is going all the way back to the year 2000. But this is Kevin Walsh's first speech as Fed Chair and there's a lot of uncertainty right now so the markets might be in for some more volatility than usual. We'll break it all down on Monday so definitely get subscribed to the podcast if you haven't already and tune in every day to stay in the loop. Let's run through some headlines starting with Meta. Earlier this week, Meta agreed to a settlement that would end a lawsuit from 48 states over teen mental health and social media addiction. Quick refresher on the situation here. Meta was two weeks into a federal trial in Oakland where a coalition of state attorney generals argued the company deliberately designed Instagram and Facebook to be addictive for kids and teens. This was a pretty big trial, the head of Instagram had already testified in this trial and CEO Mark Zuckerberg was scheduled to testify next. The states were asking for $200 billion in damages from Meta plus changes to Meta's apps. Well the two sides agreed to settle for $18 billion but the key thing is Meta also agreed to make changes to their apps. Over the next year or so, Meta will roll out changes for users under 18 that will put a two-hour daily time limit for Facebook and Instagram. There will also be a night mode that blocks access to their apps from midnight to 6am and notification to their apps will be shut off during school hours. This will only apply to users under the age of 18 in the U.S. and teens won't be able to turn off these restrictions without parental permission. Meta will also restrict things like beauty filters and visible light counts for teens and they're also going to tighten their age verification process. Personally, as someone with kids, I think these are all great changes. I kind of wish they applied them to everybody. What's funny here is that now that Meta has settled their case, they're now publicly pressuring TikTok, YouTube, and Snapchat to make the same changes to their app. Meta says it wants to create a new industry standard and they are literally running newspaper ads calling on their competitors to join them. Now here's the clever part that Meta slipped into their settlement. $5.3 billion of their $18 billion settlement is contingent. Meta will only pay that if TikTok and YouTube, which are also under trial, each pay $5.3 billion to settle their own cases and impose a one-hour daily time limit on teen users. If they do end up doing that, Meta would tighten their limits from two hours down to one hour as well. Meta is playing 4D chess here because for Meta, teens make up less than 1% of their revenue and these restrictions could end up hurting Meta's competitors more than they hurt Meta. For example, US teenagers spend more than 96 minutes a day on TikTok versus only 34 minutes a day on Instagram. And I imagine teens spend a lot more time on YouTube over Instagram as well. So if the whole industry gets capped at the one-hour daily time limit, Meta won't get hit as hard as their competitors like TikTok and YouTube. And even if Meta does end up paying the $18 billion settlement, they have to pay it over 10 years. So financially, it's not a big deal at all because for some context, Meta made over $20 billion in operating income in the last quarter alone. So $18 billion over 10 years is nothing, especially when you consider how much money Meta is spending on data centers. So yeah, I gotta say Meta found a way to turn this lawsuit and settlement into a way to hurt their competitors. And that's why Meta stock actually jumped 3% after the settlement news. Let me know in the comments on what you guys think about all of this. Do you think that Meta got off too easy? And do you think that TikTok and YouTube should be implementing the same restrictions for teenage users that Meta will be doing moving forward? Let's talk about some stocks making moves today. Gap shares are gapping up this morning after reporting earnings last night and announcing a new CEO for Old Navy. The earnings themselves from Gap were actually pretty disappointing. Revenues were down 2% to $3.65 billion, which came in below estimates. Adjusted earnings came in at $0.52 per share, which did slightly beat estimates. Gap is the parent company for brands like Old Navy, Banana Republic, Athleta, and obviously Gap. And right now, the weakness in sales is coming from Old Navy, which is Gap's biggest brand and makes up nearly 60% of the company's revenue. Personally, I'm a big Old Navy fan, but right now the brand is struggling. Old Navy's comparable sales fell 4% last quarter, which was much worse than expected. The company blamed the miss on weak seasonal product lines and slower foot traffic. But despite the disappointing earnings, the stock is still up more than 10% this morning in premarket trading because Gap just named Michael Francis as the new CEO of Old Navy. Apparently, this dude Michael Francis was responsible for building Target's cheek image back in the 2000s, and the market seems to think he can work his magic at Old Navy to turn things around. So Gap stock is getting a nice boost this morning despite the mediocre earnings, and the stock needed this. Shares were down 17% this year heading into the earnings report. Now on the flip side, Marvell stock is taking a hit this morning despite reporting a pretty strong quarter. Marvell is a company that designs custom AI chips and networking gear to connect AI servers inside data centers, and revenues were up 37% last quarter to $2.74 billion, and their data center business alone grew 46%. Adjusted earnings for the quarter came in at 94 cents a share, but that narrowly beat Wall Street estimates. And looking ahead, the company even raised its long-term outlook. Marvell now expects $12 billion in revenue for this fiscal year and $18 billion in revenue for fiscal 2028. But despite the beat on earnings, the stock is still down around 7% this morning in pre-market trading because expectations were just too high. The market wanted Marvell to crush earnings, and Marvell only slightly beat expectations. And for a stock that's almost tripled this year, slightly beating earnings expectations is not good enough. You have to blow expectations out of the water, kind of like what Nvidia did yesterday. On top of that, Marvell also said their partnership with Google won't start contributing to their revenues until fiscal 2029, and who knows what the AI space will look like then. So this was basically a case of good earnings, but not good enough, and that's why Marvell's stock is down this morning. Let's wrap the show with a fun fact. Time Magazine just released their list of the 100 most influential people in AI, and you had some obvious names on that list, including Sam Altman, the CEO of OpenAI, Dario Amadei, the CEO of Anthropic, and Elon Musk. But for some reason, Jensen Huang, the CEO of Nvidia, the most valuable company in the world, did not make the list. I mean, this is absolutely crazy. Not only should Jensen be on this list, his face should take up the entire cover. Jensen not being on this list is like LeBron James or Steph Curry not being on the list of the top 100 basketball players of all time. Now to be fair, Time Magazine did put Jensen on their list back in 2024 and 2025, so maybe this is just a case of Jensen fatigue and they wanted to rotate in some new names. This is kind of like how LeBron could have won MVP every year from like 2008 to 2018, but I think the voters were tired of voting for him, so he only ended up winning four MVPs in his career. So yeah, maybe it's just Jensen fatigue by Time Magazine, or maybe Time Magazine knew exactly what they were doing because leaving Jensen off this list was guaranteed to get people talking. And yeah, it worked. I'm ranting about it here on the podcast. By the way, some unexpected names to make this list include Paris Hilton and Joseph Gordon-Levitt. So I can't wait to see why they made the list. Also Jeff Bezos made this list, and I'm pretty sure he's been partying in St. Barts for the last two years on his billion dollar yacht. So good one Time Magazine, you guys knew exactly what you were doing. Well alright guys, that's the rundown for today. That's the rundown for this week. Hope you guys enjoyed today's episode. A quick programming note, we aren't going to have a deep dive this weekend or next weekend. We're taking a little bit of a break from the deep dives, but we're still going to be posting an interview. We have a great one coming up this weekend about SpaceX, so definitely keep an eye on your podcast feed for that. Thank you guys so much for listening, watching, and commenting. Shout out to Mike and V for all the work behind the scenes, and we'll see you guys back here for the interview.