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Two recent court decisions have addressed long-standing concerns about the harmful effects of social media on teenagers, with potential implications for your 401(k).
Juries in both New Mexico and California have determined that platforms like YouTube, Facebook, and Instagram are addictive and detrimental to younger audiences.
These platforms, well-known for generating significant revenue, are owned by tech giants Meta and Alphabet, which also owns Google. Although the courts awarded only modest sums to plaintiffs in these cases, the broader consequences could be substantial.
Following the rulings, Meta’s stock plummeted over 8%, while Alphabet, the parent company of YouTube and Google, saw a decline of about 4%.
Alvaro Bedoya, a former Federal Trade Commission commissioner, remarked on X that “a jury of everyday citizens has succeeded where Congress and state legislatures have not: holding Meta and Google accountable for their roles in addicting young people to their platforms.”
Some investors are now asking if this is social media’s Big Tobacco moment.
How do cigarette companies relate to social media platforms? Two words: Giant lawsuits.
In the early 1990s, it emerged that tobacco companies had concealed the fact that they knew all along that cigarettes were not only highly addictive but also caused cancer – after decades of pleading ignorance.
Meta chief executive officer Mark Zuckerberg testified in person at the California trial in February
The class-action lawsuits began, and by the mid aughts Big Tobacco had paid out hundreds of billions of dollars in settlements.
Now a huge cohort of individuals, local school districts and individual states are lining up to sue social media companies, alleging personal injury or claiming the products are hurting students.
Alphabet and Meta are among the most prominent members of the famous ‘Mag 7’ group of stocks that now make up more than 30 percent of the S&P 500.
And these two stocks are without a doubt a big part of your 401(k) retirement fund, which is typically invested in assets like a S&P 500 index fund.
Shares of the two companies are down sharply over recent months, with Alphabet 16 percent below its most recent high and Meta down nearly 30 percent since its most recent high.
The companies’ AI woes are well known, but now they have weight from a storm of litigation to contend with as well.
Advocates for children harmed by social media draw strong parallels between tobacco and social media.
“For the parents whose children died as a result of social media harms, today’s verdict is a huge step toward truth, justice, and accountability,” Sarah Gardner, chief executive officer of Heat Initiative, which seeks to hold tech accountable for its harms, told CNN.
Advocates for children harmed by social media draw strong parallels between tobacco and social media
Supporters of the California plaintiff hold signs outside the courthouse in Los Angeles on February 25, 2026
Gardner said that the California ruling was ‘social media’s Big Tobacco moment,’ when the harm the companies cause children was ‘proven in a court of law.’
In the case, a 20-year old Los Angeles woman said she became addicted to Instagram and YouTube as early as age six.
Social media companies have long been shielded from most legal threats by laws that make them immune to legal challenges regarding the content posted by users, but this case targeted site features rather than content.
The plaintiff claimed that social media features like push alerts and infinite scrolling dominated her childhood, leading to compulsive use, anxiety, body dysmorphia, self-harm and suicidal thoughts.
In their verdict, the jury wrote that both companies had acted with ‘malice, oppression or fraud.’