TikTok Ban Could Benefit Meta, Yet Meta's Stock Drops 2.3% – What's Going On?

 

As the TikTok ban drama intensifies, many are speculating that the U.S. could enforce a “sell or ban” order by January 19. You’d think this would be a win for Meta ($META), but curiously, Meta’s stock dropped 2.31% yesterday. So, what’s going on?

 

 

On Tuesday, Meta announced it’s laying off about 5% of its workforce—around 3,600 employees. The cuts are based on performance reviews, and Mark Zuckerberg’s internal memo to employees made it clear that Meta is “raising the bar” and speeding up the process of “moving out low performers.” For those affected, he promised “generous severance,” so it’s not all bad news for those leaving the company.

 

 

The last major round of cuts at Meta came in 2023, when the company slashed about 10,000 positions in a cost-cutting drive after Zuckerberg declared it the "year of efficiency." In 2022, Meta reduced its workforce by around 11,000 roles.

 

This marks Meta’s first major layoff since 2023. These cuts appear to be part of an effort to strengthen the company, as Zuckerberg expects 2024 to be a "tough year" focused on artificial intelligence, smart glasses, and social media innovation.

 

Zuckerberg plans to replace many of the existing employees with new hires focused on AI, as Meta and other big tech companies double down on chatbots and other AI-driven services. With AI increasing office efficiency, many companies are optimizing costs, and employees are paying the price. It’s somewhat similar to how many workers lost their jobs during the industrial revolution—an inevitable part of progress.

 

Last week, Zuckerberg also announced that Meta would end its diversity, equity, and inclusion programs, effective immediately. This likely aligns with Zuckerberg’s effort to reshape Meta for the Trump era and build closer ties with the new administration to protect the company from regulatory threats.

 

Last year, Zuckerberg donated $1 million to Trump’s inauguration fund and expressed a willingness to collaborate with the Trump administration to combat what he perceives as excessive regulatory pressure from the EU and other foreign markets. Zuckerberg also plans to attend Trump’s inauguration on January 20. I believe Zuckerberg still wants to maintain a good relationship with the incoming Trump administration to secure more benefits. However, it’s unclear how much Meta will actually benefit once Trump is in office.

 

Honestly, up until yesterday, I thought the TikTok ban would be good news for Meta, a social media company with a similar short-video format. But with more and more U.S. users flocking to RedNote, a Chinese social media platform, it has topped the App Store download charts.

 

This shift makes me think that Meta or Google may not benefit as much from the TikTok ban as expected. Many U.S. users, upset by the government’s stance on banning TikTok, are turning to RedNote as a form of protest, avoiding Instagram and other U.S. social media platforms. They’ve even started a hashtag #tiktokrefugee, which has garnered over 8 million mentions.

 

 

There are also many U.S. users on RedNote asking how to buy A-shares, which signals a potential upside for the Chinese market. Chinese stocks tied to RedNote have surged, and investors are betting on this new trend.

 

For Meta, while it hasn’t completely lost the opportunity to tap into TikTok refugees, it’s tough to predict how much traffic and ad revenue Meta will actually gain from the TikTok ban. Wall Street analysts expect that if TikTok is banned in the U.S., it could boost similar social media platforms with short-form video features, including Meta’s Instagram (Reels) and Snapchat (Spotlight).

 

Wells Fargo analyst Ken Gawrelski upgraded Snap ($SNAP) with a “buy” rating and a $15 target price. In a report on Sunday, he estimated that if TikTok were banned, Snap’s stock could rise by around $8, assuming Snap captures 5% of TikTok’s ad budget in the U.S.

 

Similarly, Meta’s stock should see a bump if TikTok is banned, but how much of a surge remains uncertain. However, if TikTok’s U.S. operations are sold rather than banned, Meta and other competitors could face a setback in their stock prices.

 

What do you think? Will the TikTok ban truly boost Meta, or is the shift toward platforms like RedNote a sign of things to come?