Forget About Meta’s AI Scandal with China… The Numbers Still Scream “Buy the Dip”

Meta’s been riding the struggle bus lately… and with everything going on, it doesn’t look like it’s pulling into the station anytime soon. The stock is down 10% in April, nearly 30% off its February highs, and now it’s facing some of the most serious allegations in its history: claims that it helped China gain an edge in the AI arms race.

The accusations come from Sarah Wynn-Williams, a former director of global policy at Meta, who’s scheduled to testify before Congress. Her claim? That Meta was briefing Chinese officials on advanced technologies as far back as 2015, with the explicit intent of helping China outpace U.S. tech companies… especially in artificial intelligence.

She even draws a “straight line” from those meetings to China’s current military AI capabilities. Whether that line exists or not… is still very much up for debate.

Of course, Meta’s response is a hard denial. The company called the claims “divorced from reality” and emphasized that their services aren’t even available in China. (Which is true… Facebook has been banned there since 2009.) Meta’s also pointing out that Wynn-Williams left in 2017 and that her allegations don’t include any direct evidence.

Still, when your former exec drops a best-selling memoir called Careless People and the lead Senator investigating you is Josh Hawley, things tend to snowball.

But let’s ignore the noise for a second and look at what really matters… is the stock even buyable right now? When you actually look at what really matters (fundamentals), they look rock solid. In Q4, the company pulled in $48.4 billion in revenue… and $46.8 billion of that came from advertising. That’s 97% of its total sales. So clearly, the ad machine is very much alive and well.

More importantly, the Family of Apps (Facebook, Instagram, WhatsApp, and Threads) posted a 61% operating margin last quarter. For reference, that’s one of the highest among any large-cap tech stock. This is still the most cost-effective, high-ROI platform for advertisers to reach billions of users globally (minus China).

And let’s not forget… Meta's gross margin is 81.7% (almost double that of Apple). Companies would kill for numbers like that. But here’s where it gets blurry. Meta doesn’t sell physical goods, so you’d think they’re insulated from tariffs, right? Well, not quite.

If President Trump’s tariffs drive up prices for imported goods, consumer demand could slow. When consumers pull back, companies respond by cutting ad budgets, which is exactly where Meta lives. Think of it as secondhand smoke… Meta’s not lighting the match, but it could still choke on the fumes.

Meta’s exposure to Chinese advertisers (yes, they still make money from Chinese businesses advertising to Western users) could also dip if trade tensions escalate. It’s not front-page risk, but it’s not zero either. Then there’s Reality Labs… Meta’s billion-dollar science project that, so far, has mostly produced receipts.

Last quarter, the division brought in $1.1 billion in revenue and racked up $5 billion in losses. That pushes total losses on Zuck’s metaverse moonshot past $40 billion. And what do investors have to show for it? A handful of smart glasses, some clunky VR headsets collecting sawdust on shelves, and screenshots of Zuckerberg’s legless avatar doing yoga in a digital living room. Not exactly the kind of return you brag about in your portfolio.

To be fair, the vision here is exciting: AI-integrated devices, spatial computing, immersive platforms… the kind of long-term tech play that could eventually redefine how we work, socialize, and (most importantly) waste time online. In the best-case scenario, Reality Labs becomes Meta’s version of AWS… a costly experiment that turns into a profit leader. But right now, it’s just a massive drag on margins. And even analysts who are otherwise bullish on Meta have started cutting earnings forecasts to account for the cash burn.

This isn’t a fast-moving growth play anymore. Meta has become a complex, mature tech king… still generating billions from its dominant ad business, but also facing growing pressure from regulators, geopolitical uncertainty, and major investments that may take years to pay off.

That said, here’s where I stand… if you think Meta keeps its grip on digital advertising, and Zuck eventually stops lighting billions on fire in the metaverse (big “if”), this dip might end up looking like a gift a year or two from now.

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Stock.News has positions in Meta and Apple.