Meta’s AI Ambitions Face Legal and Strategic Crossroads

Meta Platforms, Inc. has made a decisive move in the artificial intelligence arena with its acquisition of Singapore-based AI startup Manus for a sum exceeding $2 billion. This transaction stands as the largest of its kind within the AI sector to date. However, this strategic expansion is unfolding against a backdrop of significant legal challenges, creating a complex narrative for investors. The company's shares concluded Friday's trading session at $650.41, a figure approximately 8% below their annual peak.

Adding substantial uncertainty to Meta's outlook is a lawsuit filed in late December 2025 by the U.S. Virgin Islands. The litigation alleges that the social media giant knowingly profited from fraudulent advertising on its platforms. A particularly serious claim within the suit suggests internal company data may indicate Meta generated up to $16 billion from so-called "scam ads" in 2024 alone—a sum representing nearly 10% of its total revenue for that period. These allegations raise pressing questions about potential financial penalties and long-term reputational damage, leaving the market to speculate on the possible consequences.

A Pivot in AI Strategy

The acquisition of Manus signals a notable strategic shift for Meta in its approach to artificial intelligence. The startup brings with it approximately $100 million in annual recurring revenue, implying Meta paid a multiple of roughly 20 times sales. Technologically, Manus boasts a system capable of processing 147 trillion tokens and has generated 80 million virtual computers.

More crucially, the deal marks a partial departure from Meta's historical commitment to open-source AI models, such as LLaMA. The company is now channeling resources into developing proprietary, commercial models under the internal code names "Avocado" and "Mango." These are specifically engineered for the competitive AI agent market. Meta plans to integrate Manus's technology into its next major AI model, with a target launch date set for mid-2026.

Should investors sell immediately? Or is it worth buying Meta?

Solid Fundamentals Amidst Uncertainty

Operationally, Meta's core business continues to demonstrate robust health. For the third quarter of 2025, the company reported earnings per share of $7.25, comfortably surpassing analyst expectations of $6.74. Quarterly revenue saw a significant increase of 26.2%, reaching $51.24 billion. This growth was driven by a 14% rise in ad impressions coupled with a 10% increase in the average price per ad.

Despite these strong results, a note of caution has emerged. Notably, Chief Operating Officer Javier Olivan sold shares valued at around $340,000 in late December. Transactions by corporate insiders often attract heightened scrutiny, particularly when they coincide with periods of legal pressure on the company.

Market analysts, however, are largely maintaining a positive outlook. Morningstar has assigned the stock a fair value estimate of $850, while Piper Sandler reaffirmed its "Overweight" rating with a price target of $840. Their optimism is rooted in the belief that Meta's advertising business is poised for continued growth in 2026, fueled by AI-powered tools. With a current price-to-earnings ratio of 29.2, which sits below its historical average, some view the stock as potentially undervalued given its future growth prospects.