March 26 wasn’t a pleasant day for social media stocks, which fell sharply after a Los Angeles jury found that Meta Platforms (META) and YouTube were negligent in protecting children on their platforms and deliberately structured their platforms to make them addictive. The ruling comes at a time when broader markets are already under pressure amid uncertainty over the Iran war.

Specifically, META stock fell nearly 8% on March 26 and had its worst day in months, while YouTube parent company Alphabet (GOOG) fell just over 3%. Reddit (RDDT) and Snap (SNAP) also plunged, with the latter witnessing a double-digit dip after the European Union opened a child safety probe against the company.

GOOG Stock Is Nearing Bear Market Territory

After yesterday’s fall, GOOG stock extended its year-to-date (YTD) decline to more than 10% while the drawdown from its peak is almost 20%, pushing the stock on the verge of bear market territory. Alphabet stock has fared better than its average "Magnificent Seven" peer this year, however, and was also the best-performing constituent of the coveted group last year.

While Alphabet stepping up its artificial intelligence (AI) game with Gemini 3 helped propel shares in 2025, a key legal victory also drove the rise in GOOG stock. The company won a major reprieve in a U.S. Department of Justice antitrust case as U.S. District Judge Amit Mehta allowed it not only to retain Chrome and Android but also to continue its partnership with Apple (AAPL) that makes it the default choice on iPhones. That case was like a hanging sword for GOOG stock and had been dampening sentiments.

However, legal woes are now back to hitting shares, and while the combined damages that Meta and Alphabet will have to pay after the Los Angeles verdict are a mere $6 million, the ruling could open up a can of worms. Moreover, the ruling comes at a time when there is global clamor over teen social media addiction.

Teen Social Media Addiction Is a Burning Issue

Australia has already banned kids below the age of 16 from using social media, becoming the first country to do so. Several European countries are also at various stages of enforcing such bans. In Asia, Indonesia and Malaysia plan to ban social media for children while in India — which is the biggest market for Meta in terms of users — the state of Karnataka has banned children below 16 from using social media. 

The uproar over teen social media addiction appears to be a bigger risk for Meta, as it gets nearly all of its revenue from social media. For Alphabet, YouTube accounts for less than 15% of total revenue. In response to the recent verdict, which Alphabet plans to appeal, a Google spokesperson said, “This case misunderstands YouTube, which is a responsibly built streaming platform, not a social media site."

While opinions may vary on the “responsible” part here, many likely agree that YouTube is a streaming platform. That said, the verdict opens the floodgates for similar lawsuits related to AI chatbots in the future.

Should You Buy GOOG Stock?

I have been bearish on GOOG stock for the last few months. Shares have corrected significantly from their peak and now trade at a forward price-to-earnings (P/E) multiple of just under 25 times, which is still higher than the historical average. However, tech companies’ one-year forward multiples appear elevated since their earnings growth may be subdued over the next couple of years, as AI capex starts hitting profits in the form of higher depreciation expenses.

There are other moving parts of valuation, too. Alphabet has services like Waymo, which will add long-term value even though the business — which is part of its “Other Bets” segment — is currently a drag on profits. Over the long-term, Alphabet’s Tensor Processing Units (TPUs) could be a key growth driver, although current estimates don't seem to suggest that analysts are factoring in much of a contribution from that business.  

All told, after the recent correction, I am less bearish on Alphabet than I was at the peak. The risk-reward looks a lot more balanced now, even though GOOG stock has not entered a compelling buy zone yet, given the uncertain global macro environment amid tensions in the Middle East.

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