Meta Platforms has not been having the greatest moments in July as Mark Zuckerberg strives to be the top dog in the tech industry. On Jul. 7, the Facebook division experienced an 11% stock crash. The storm grew larger due to a series of parental complaints about their teens using the in-house AI for suicide advice, and now, 26 employees have filed a class action lawsuit. They claim that the head staff used the AI for selective layoffs, mainly employees going on reasonable leave.
The Meta Downtrend Replay
Zuckerberg has quickly repeated history on his Facebook AI empire. Meta previously experienced a stock plunge back in October, when 10% of its market value dropped. It was impacted by a billion-dollar tax cut from the One Big Beautiful Bill Act, as stated in the official Q3 2025 financial report:
“We expect a significant reduction in our US federal cash payments for the remainder of 2025 and future years due to the implementation of the OBBBA. However, [the bill] also led to the recognition of a valuation allowance against our US federal deferred tax assets, reflecting the impact of the US Corporate Alternative Minimum Tax. As a result, the third-quarter 2025 provision for income taxes includes a one-time, non-cash income tax charge of $15.93 billion.”
As one of the leading US AI hyperscalers, Meta’s spending greatly depreciated the company’s stock. Zuckerberg brushed it off at the time, claiming it was due to the high demand for computing capacity. “We keep seeing this pattern where we build some of the infrastructure to what we think is an aggressive assumption, and then we keep having more demand to be able to use more compute, especially in the core business,” he told the public.
Unfortunately, the Facebook founder would eat his words after 11% of his stock fell when the company entered July. The Motley Fool reported similar aspects that dropped its value in the AI industry. “[…] Overspending on AI and capital expenditures, and a lack of direction in artificial intelligence, the company has struggled to develop a meaningful revenue stream beyond advertising,” said stock market analyst Jeremy Bowman.
The Meta Suicide Psychosis
Meta is one of the free-to-use AI software that users can interact with when they need to search for anything. Like its competitors, such as ChatGPT, it’s also easily accessible to children and teenagers. The past few years have shown how dangerous AI models can be based on user preferences.
For the Facebook AI, it’s under scrutiny for educating teenagers on suicidal methods. But much more terrifying is the contractors the social media giant has hired to train various models for competitive probing. Wired was informed that they were tasked to act as minors and prompt the AI to search for inappropriate topics, including sex, drugs, and suicide.
Rather than pushing for improved safety measures, these prompts were granted bypass. In August 2025, more than 45,000 prompts were operated by rival chatbots, and none were informed about this project. Wired was able to review a spreadsheet of 3,748 prompts, discovering disturbing scenarios the contractors had to imagine. Meta has defended the practice for safety precautions.
These business claims did not stop lawsuits against Meta. The plaintiffs have proven that the company’s business strategy is manipulating social media addiction. Both Facebook and its sister platform, Instagram, are at fault for advertising harmful content.
Due to multiple teen suicides, Zuckerberg’s team has implemented a new security feature for Meta AI. When a child is searching for any self-harm methods, the AI will recommend crisis hotlines and send notifications to their parent or entrusted guardian. For now, it’s in its early stage and will have its effectiveness monitored.
Meta Layoffs Suspected of Selective Employee Firing
Earlier in April, Meta underwent an 8,000-job layoff as part of the suspension of their AI infrastructure. The social media giant told the public that it will increase the chances of new investments and improve business efficiency.
26 former employees from the layoffs have returned with a lawsuit against Zuckerberg. These employees claimed that the head staff had consulted with their in-house AI to fire employees who filed for leave. A majority of the plaintiffs have reported being on either family, disability, maternity, or parental leave. The lawsuit listed the appropriate violations, including the Pregnancy Discrimination Act and the Pregnant Workers Fairness Act.
However, the Trump Administration could make things difficult. The protected acts fall under Title VII of the 1964 Civil Rights Act under disparate impact liability. Lawmakers are in the process of trying to abandon worker protection, for it is considered wasteful government spending. Luckily, the former employees can still pursue the case under the Equal Employment Opportunity Commission.
Meta responded to the case, saying that the layoff was made by human decision-making. “[The plaintiffs] lack merit and are not based on facts. Workforce management and organizational decisions were and are made by humans, not AI.” Zuckerberg’s efforts to keep the company afloat show how the tech oligarchy could be crumbling faster than expected.
