#SocialStocks: Trump comes out in support of TikTok, cites competition

Nvidia CEO applauds Llama 3.1 models, SEC sues former CEO of Digital World Acquisition and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

NO POLITICS POLICY: 

Meta Platforms (META) staff internally complained about Threads’ algorithm limiting political posts after the For You page was slow to show news of President Joe Biden dropping out of the presidential race, The Information’s Kalley Huang and Sylvia Varnham O’Regan reported.

META AI ROLLOUT: 

Meta announced that Meta AI is now available in seven new languages and more countries around the world, including in Latin America for the first time. Meta AI is now available in 22 countries, with the newest today in Argentina, Chile, Colombia, Ecuador, Mexico, Peru and Cameroon. Meta said it is introducing new Meta AI creative tools, “making it easier to bring your vision to life and turn your ideas and imagination into images.”

LLAMA: 

Meta also announced the release of Llama 3.1 405B, the first frontier-level open source AI model, as well as new and improved Llama 3.1 70B and 8B models. “In addition to having significantly better cost/performance relative to closed models, the fact that the 405B model is open will make it the best choice for fine-tuning and distilling smaller models,” Meta CEO Mark Zuckerberg said in a blog post. “Beyond releasing these models, we’re working with a range of companies to grow the broader ecosystem. Amazon (AMZN), Databricks, and Nvidia (NVDA) are launching full suites of services to support developers fine-tuning and distilling their own models.” Zuckerberg said Meta is “committed to open-source AI.”

Snowflake (SNOW) announced that it will host the Llama 3.1 collection of multilingual open-source large language models in Snowflake Cortex AI for enterprises. This offering includes Meta’s (META) most powerful open source LLM, Llama 3.1 405B, with Snowflake developing and open sourcing the inference system stack to enable real-time, high-throughput inference. “Snowflake’s world-class AI Research Team is blazing a trail for how enterprises and the open-source community can harness state-of-the-art open models like Llama 3.1 405B for inference and fine-tuning in a way that maximizes efficiency,” said Vivek Raghunathan, VP of AI Engineering, Snowflake. “We’re not just bringing Meta’s cutting-edge models directly to our customers through Snowflake Cortex AI. We’re arming enterprises and the AI community with new research and open-source code that supports 128K context windows, multi-node inference, pipeline parallelism, 8-bit floating point quantization, and more to advance AI for the broader ecosystem.”

Nvidia (NVDA) announced a new Nvidia AI Foundry service and Nvidia NIM inference microservices to supercharge generative AI for the world’s enterprises with the Llama 3.1 collection of openly available models. “With NVIDIA AI Foundry, enterprises and nations can now create custom ‘supermodels’ for their domain-specific industry use cases using Llama 3.1 and NVIDIA software, computing and expertise. Enterprises can train these supermodels with proprietary data as well as synthetic data generated from Llama 3.1 405B and the NVIDIA Nemotron Reward model.” “Meta’s (META) openly available Llama 3.1 models mark a pivotal moment for the adoption of generative AI within the world’s enterprises,” said Jensen Huang, founder and CEO of NVIDIA. “Llama 3.1 opens the floodgates for every enterprise and industry to build state-of-the-art generative AI applications. NVIDIA AI Foundry has integrated Llama 3.1 throughout and is ready to help enterprises build and deploy custom Llama supermodels.”

AD-FREE MODEL SCRUTINIZED: 

On Monday, The Consumer Protection Cooperation Network sent a letter following concerns that Meta’s ‘pay or consent’ model might breach EU consumer law. The Commission coordinated this action which is led by the French Directorate General for Competition, Consumer Affairs and Fraud Prevention. The action started in 2023, immediately after Meta had requested consumers overnight to either subscribe to use Facebook and Instagram against a fee or to consent to Meta’s use of their personal data to be shown personalized ads, allowing Meta to make revenue out of it. This coordinated action by the CPC network against Meta comes on top of other ongoing EU and national procedures related to the same model. This action focuses specifically on the assessment of Meta’s practices under EU consumer law and is distinct from the ongoing investigations against the company by the Commission on its ‘pay or consent’ model potentially breaching the Digital Markets Act, the Commission’s formal request for information under the Digital Services Act, and the assessment by the Irish Data Protection Commission under the General Data Protection Regulation. CPC authorities identified several practices in the context of Meta’s roll-out of its new business model that raise concern and could potentially be considered unfair and contrary to the Unfair Commercial Practices Directive and the Unfair Contract Terms Directive. Meta has until September 1, 2024 to reply to the letter of the CPC network and the Commission and to propose solutions. If Meta does not take the necessary steps to solve the concerns raised, CPC authorities can decide to take enforcement measures, including sanctions.

NEW APPROACH TO PRIVACY: 

In a blog post, Google’s (GOOGL) Privacy Sandbox said it is proposing an updated approach to privacy on the web “that elevates user choice.” “We developed the Privacy Sandbox with the goal of finding innovative solutions that meaningfully improve online privacy while preserving an ad-supported internet that supports a vibrant ecosystem of publishers, connects businesses with customers, and offers all of us free access to a wide range of content,” the company said. “Throughout this process, we’ve received feedback from a wide variety of stakeholders, including regulators like the UK’s Competition and Markets Authority and Information Commissioner’s Office, publishers, web developers and standards groups, civil society, and participants in the advertising industry. This feedback has helped us craft solutions that aim to support a competitive and thriving marketplace that works for publishers and advertisers, and encourage the adoption of privacy-enhancing technologies… Instead of deprecating third-party cookies, we would introduce a new experience in Chrome that lets people make an informed choice that applies across their web browsing, and they’d be able to adjust that choice at any time. We’re discussing this new path with regulators, and will engage with the industry as we roll this out.”

SPORTS CONTENT PACT: 

Reddit (RDDT) is teaming up with sports leagues including the NFL, NBA and MLB to get videos and other content for its social media site, The Information’s Sahil Patel noted. Reddit will use the content to draw advertisers and then share the revenue it generates with the sports leagues, Patel writes.

LOSING PINTEREST: 

Grizzly Research said in a new research note that Pinterest (PINS) appears to be in a “death spiral,” losing user engagement at steep rates, while driving users away with ever-increasing ad spam. The firm said Pinterest misleadingly doctors its “terrible” performance statistics, hiding the “wreckage” of its core business, and says independent sources all confirm this conclusion. Grizzly argues that Pinterest’s operations will “at best” be barely cash flow positive going forward and estimates Pinterest is worth less than half of its current value of over $40, and contends that its models value the shares in a range between $5.28-$16.

NO AI FOR YOU: 

Meta Platforms will halt the use of generative AI tools in Brazil in response to the government’s objections to its new privacy policy regarding personal data and AI, Reuters’ Andre Romani and Luciana Magalhaes reported. Brazil has the second-largest user base for Meta’s WhatsApp after India, the report noted, adding that earlier this month, Brazil’s National Data Protection Authority decided to suspend the validity of Meta’s new privacy policy for the use of personal data to train generative AI systems in the country.

Separately, Meta will not offer future multimodal AI models to customers in the European Union because of what it says is a lack of clarity from regulators in the region, Axios’ Ina Fried reported. “We will release a multimodal Llama model over the coming months, but not in the EU due to the unpredictable nature of the European regulatory environment,” Meta said in a statement to Axios. Fried noted that Apple (AAPL) said last month that it will not release its Apple Intelligence features in Europe because of regulatory concerns.

FRAUD ALLEGATIONS: 

The SEC is suing the Patrick Orlando, the former CEO of the blank-check company that merged with Trump Media (DJT), accusing him of lying about his firm’s plans to combine with Donald Trump’s social media startup. Orlando allegedly lied in public filings when he said his company, Digital World Acquisition Corp. (DWAC), had not contacted any possible merger targets and had no specific merger plans, the SEC said in the lawsuit filed Wednesday night in Washington, D.C., federal court. “Orlando knew these statements were false,” the SEC’s civil complaint alleges, adding that “He had personally engaged in numerous lengthy discussions” with Trump Media’s representatives, and he had targeted the company “for months.”

MULLING POSITION: 

Meta is exploring taking a multibillion-euro stake in EssilorLuxottica (ESLOY) as the Facebook owner intensifies its push to develop smart glasses, The Financial Times’ Arash Massoudi, Hannah Murphy, and Silvia Sciorilli Borrelli noted. According to multiple people with knowledge of its thinking, Meta is considering taking a “small” stake in the eyewear group and has been holding talks with EssilorLuxottica to deepen their existing collaboration following the successful launch of a revamped version of their “Ray Ban-Meta” smart glasses last year. Meta has been working with Morgan Stanley on the matter, according to one of the people. Reference

DIVING INTO DATA: 

Meta is launching a small pilot program to let some researchers access Instagram data for up to about six months to study the app’s effect on teens and young adults, The Atlantic’s Caroline Mimbs Nyce reported. The company is expected to announce that it is seeking proposals that focus on certain research areas — investigating whether social-media use is associated with different effects in different regions of the world, for example — and that it plans to accept up to seven submissions. The program is being run in partnership with the Center for Open Science, a nonprofit, according to the report.

TRUMP FOR TIKTOK: 

Former president and current presidential candidate Donald Trump told Bloomberg Businessweek in an interview that “I’m for TikTok, because you need competition,” and that “if you don’t have TikTok, you have Facebook and Instagram” and “that’s Zuckerberg.” Facebook previously banned Trump indefinitely in the wake of the January 6 attacks. “All of a sudden,” Trump said, “I went from No. 1 to having nobody.”

SHARE SALE: 

In a regulatory filing, Meta Platforms disclosed that its general counsel Jennifer Newstead sold 905 shares of common stock on July 16th in a total transaction size of $454K.

ANALYST COMMENTARY: 

Morgan Stanley upgraded Snap. The firm’s latest advertiser/agency conversations speak to improvements in Snap’s ad business, including 7.0 attribution tools and an increase in advertiser willingness to test direct response offerings more broadly, the analyst tells investors. The firm, which also believes there is an improved app install offering coming for further growth, raised its Snap FY24 and FY25 revenue estimate by about 2% each and its EBITDA forecasts by about 8% and 6%, respectively. The firm previewed Q2 EPS for the North American Internet group, stating that Amazon (AMZN) remains its top mega cap pick. Reddit’s price target was raised at Morgan Stanley while Pinterest’s price target was elevated.

Bernstein increased its price target on Reddit. The firm revises up its near-term estimates tied to the OpenAI partnership announced in May, which it expects to bring 500-800bps of revenue contribution starting in Q3. Q2 data continues to track well, with web traffic up 38% year-over-year in Q2, with Google the primary source of traffic. The real test for Reddit should come in Q3, as the company laps Google’s algorithm changes affecting web traffic and ad dollars, Bernstein added. Bernstein also upped the firm’s price target on Meta Platforms. The firm likes Meta here against reset expectations. Bernstein noted expectations on Meta’s revenue growth have reset since Q1 earnings, with investors now expecting revenue growth to come in towards the top end of their guidance.

Oppenheimer raised its price target on Meta. Since the presidential debate, Meta shares have underperformed the Nasdaq on possible repeal of TikTok ban, tariff risk for China advertisers, and a long-running feud with Donald Trump, the analyst told investors. As a result, the firm is less concerned with high second half of 2024 investor expectations, supported by a “robust” digital advertising market. Opco increased Q3 estimates on continued China advertiser demand, saying U.S. import volumes and shipping prices from East Asia to the U.S. are showing strong demand for China products, suggesting China advertiser tailwind continues. The firm says the Meta shares are “derisked” into the Q2 report.

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Originally Posted July 24, 2024 – #SocialStocks: Trump comes out in support of TikTok, cites competition