What Meta’s $18bn settlement means for social media

0:02Good morning from the Financial Times. Today is Thursday, August 27th, and this is your FT News briefing. NVIDIA's revenue and sales figures are holding strong. And what's next after Meta's landmark social media addiction settlement? Plus, investors think Italy is no longer the problem child of European bond markets. People are very, very negative about the kind of future outlook for the debt pile in France. I'm Sonia Hudson, in for Mark Filipino, and here's the news you need to start your day.

0:43NVIDIA reported strong sales and better-than-expected revenue yesterday. Last quarter, it brought in more than$96 billion in revenue. And the company forecast$108 billion in sales for the current quarter, which beat Wall Street estimates. The chip giant is the world's most valuable company and is at the heart of the AI boom. The earnings report shows it's still benefiting from huge demand for computing power. NVIDIA's financial performance has become a bellwether for how the AI infrastructure boom is doing. And investors seem to be happy with the earnings report. They sent NVIDIA shares up in after-hours trading.

1:30Meta settled a landmark social media addiction case yesterday, and it could have ripple effects through the whole industry. The case alleged that the company failed to protect children and created an addicting product. Meta did not admit to any wrongdoing in the agreement. This legal battle is won in a wave of litigation against social media companies. I'm joined now by the FT's Richard Waters in San Francisco to discuss what comes next. Hi, Richard. Hi, good to talk to you. Good to talk to you. So what does Meta have to do now that it's agreed to the settlement? What are the terms? Well, there are two main elements to this.

2:08One is financial. They are going to pay up to$18 billion to a group of U.S. states. They're going to pay it over 10 years. But they're only going to pay that full amount if YouTube and TikTok also reach similar settlements. And the second thing they're doing is they are agreeing on to a number of limits on how teenagers, anybody under the age of 18, that is, can use their service. And you won't be able to spend more than two hours a day on Facebook and Instagram combined if you're under 18. And there'll be a number of blackouts, for instance. You won't be able to use it overnight. Obviously, you know, there's some very big questions here.

2:53How do we even know their children that are using this? And will these changes take effect? But that's essentially what they're doing. How big of an impact do you think this will have on Meta's bottom line? So the stock was up on the back of this. And I think there's a pretty clear message here. This is less bad than the stock market had been expecting. There was some concern that they might end up paying$150 billion just to the U.S. states. So they've essentially settled all these state claims for 18 billion. And so that's a helpful thing. But, and there's a big but here, they face other claims that could potentially be much bigger.

3:31So they're also facing a lot of claims from school districts, but also importantly, individual claims from users who claim to have been harmed by social media. And very importantly, Meta and YouTube lost the first individual claim like this in March of this year. So that's the real kind of unknown in all of this and how big this could eventually become. Richard, I want to pick up on something else that you said earlier, which was that Meta has said that it will only pay about$5 billion of the settlement if YouTube and TikTok also pay that same amount of money and implement some of the same limits that Meta is.

4:17Is that going to happen? So these other companies know they have a problem. Before the trial in March that led to both Meta and YouTube being found liable for damages for harm to a single user, both Snap and TikTok settled out of court. So I think there's a signal there and YouTube itself lost in that case as well. So the writing is sort of on the wall for these companies. We haven't heard from them yet. We don't know whether they're going to go along with this. But I think there's a very good chance they both face extensive lawsuits themselves, both from individual states and from individual users.

4:58And so I think there's a very good chance that they will back this. Richard, what are the big unanswered questions for you around social media companies and their relationship with kids going forward? Well, for me, you know, there are two. I mean, one is, does this somehow become a global arrangement? You know, will legislators around the world see this as a good framework? Will it be enforceable? At the moment, Australia is the only country to have a ban on people under the age of 16 being on social media. Australia's struggling to make that effective. I think the other question is all of these services are fundamentally changing with artificial intelligence.

5:37So any kind of arrangements made now just look like they're freezing one moment in time. And who knows how effective that'll be. Richard Waters writes about tech for the FT. Thanks, Richard. Yeah, great to talk to you.

5:55bond investors think that europe has a new problem child they say france is replacing italy as the focal point for market concerns here to discuss why is the ft's emily herbert hey emily hiya so before we get into the shift just remind us of how france and italy historically have been viewed by European investors? Of course. So after the financial crisis, really, Italy for a long time was a big worry for people who were investing in European government bonds and people who were looking at deficits and fiscal sustainability in Europe. They spent a lot of money. They had a massive debt to GDP ratio and they were always viewed as the kind of big problem child in Europe.

6:37Whereas France used to be grouped much more with, say, Germany as a bit of a safer, bigger market that was viewed as less of a concern than it is now. Yeah, well, why are European bond investors becoming more concerned about France right now? Yeah, it's not a new theme either. I think investors have been getting more worried about France for probably a few years now. But I think at this point, France is going into budget negotiations later this year. And that has really highlighted the big problem for investors with France, which is that not only does it have a very big debt to GDP ratio, but it runs a big budget deficit which means that that debt to GDP ratio keeps getting higher and I think all of that is exacerbated by the fact that France has got a big presidential election coming up next year and it's looking much more likely that this will be a fight between the far right and the far left in France and what investors have been telling us in the last couple of weeks is neither of those political outcomes is likely to really bring about a focus on fiscal discipline in France and could just make the debt problem much worse.

7:44Well, I guess I'm curious then, is Italy's situation actually better or is this shift more representative of the fact that Paris's borrowing has become worse? Italy's situation has actually improved, although its debt to GDP ratio is still bigger than France's. But that ratio in Italy is coming down because crucially, Italy is running a budget surplus. So it's bringing in more money than it's spending. And that's definitely encouraging investors. And we can see that in how the bonds are priced. So Italian government bond yields are lower than French bond yields at the moment. Basically, what that tells us is that investors are demanding a bit of extra compensation to buy French debt than they are Italian debt.

8:30For decades now, you would never have seen Italy trading cheaper than France. And investors have told us that that kind of downwards trajectory of the big debt pile in Italy actually makes it a much more encouraging prospect to invest in than France. People are very, very negative about the kind of future outlook for the debt pile in France. What is the shift in how bond investors are thinking? Tell us about the relative risk of European countries. Is this a broader change that's happening across the continent? there's been a change in the last year or so in Europe where some of the southern European countries like Italy like Greece and Spain countries that came out of the financial crisis and then the eurozone crisis much worse those countries were for a long time a big worry for debt investors but actually they've been performing fairly well for the last year or so and some of the big central European economies like Germany and France which used to be perceived as much kind of safer investments, they're issuing a lot more debt.

9:34And so that is making the relative attractiveness of some of those bond markets maybe less compared to some of the quite strong Southern European economies. So we're having kind of a reversal in fortunes for European countries, at least when it comes to debt markets. Emily Herbert covers markets for the FT. Thanks, Emily. Thanks, Sonia.

9:58the 50 companies holding the most bitcoin are losing value fast so-called bitcoin treasury companies have shed 80 billion dollars in combined market capitalization since the middle of last year that's according to an ft analysis these include everything from a spanish coffee chain to a Japanese clothing retailer. About two years ago, these companies started raising debt and equity to buy up cryptocurrencies. The idea is that would supercharge their share prices. But it's proving to be unsuccessful because investors are skeptical about a model that's at the mercy of something as volatile as crypto.

10:39So now many of them are dumping their tokens and pivoting back to their original businesses, like selling coffee.

10:51You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News briefing. Check back tomorrow for the latest business news.