Nvidia Adds $442B in Market Cap, Meta Weaponizes Its $18B Settlement Against TikTok

Zaid Admani (0:00)

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid 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 times 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 recap Nvidia's earnings in detail on yesterday's show, so definitely check that out if you missed it. But yeah, Nvidia's 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 stock 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 Warsh will deliver his first Jackson Hole speech this morning at 10 a.m. Eastern. This is gonna be an important speech because ever since Kevin Warsh 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 gonna see a rate hike at the September meeting, but we'll see if Kevin Warsh provides some clarity today. Plus, I wonder if Kevin Warsh is gonna talk about the bond market chaos happening with Treasury yield spiking in recent weeks. So I'll be tuning in to the speech this morning. I'll recap what Kevin Warsh 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 Warsh'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 US 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.