META's Stock: Hidden Risks, Spring Home Sales Disappoint, AI's Steel Demand, Inflation Isn't Finished, Consumers Ignore Higher Gas, Social Security Changes Ahead & More

META's stock surged last week, but investors shouldn't ignore the risks.

Meta shares climbed last week as Wall Street became increasingly optimistic about the company's AI strategy. The stock was up about15% for the week and erased the year-to-date losses. Investors are betting that Meta's enormous spending on AI infrastructure, custom chips, top engineering talent, and next-generation models will lead to faster revenue growth, stronger advertising tools, and new revenue streams over the next several years. The market clearly believes Meta has positioned itself as one of the leaders in the AI race.

But while investors were celebrating, Europe reminded everyone that even great companies face meaningful risks.

The European Commission announced preliminary findings that Facebook and Instagram may violate the Digital Services Act because of what regulators call "addictive design" features, including infinite scrolling, autoplay videos, and recommendation algorithms that encourage users to stay engaged for longer periods. If the findings become final and Meta does not make sufficient changes, the company could face fines of up to 6% of its global annual revenue, along with potential changes to how its platforms operate across Europe. Meta has disputed the findings and says it has already implemented significant protections for younger users. This could amount to a fine of around $12 B, but the bigger problem I see is a potential hit to ad revenue if they must change their business practices. Europe is an important part of their business considering it accounts for about 23% of overall company sales.

We also can't forget the legal liability Meta is facing in the United States, which could ultimately total as much as $1.4 trillion. That number may sound shocking, but it stems from multiple lawsuits brought by numerous states and plaintiffs.

The first major cases are scheduled to go to trial in August, with California, Colorado, New Jersey, and Kentucky leading the way. The lawsuits allege deceptive business practices, and potential penalties range from $2,000 to $20,000 per violation. Given Meta's massive user base, those fines could accumulate rapidly if the courts rule against the company. Beyond civil penalties, the states are also seeking disgorgement of profits, which would require Meta to surrender profits earned from the alleged misconduct during the relevant period. If Meta performs poorly in these initial cases, another 25 states have similar lawsuits waiting in the wings, significantly increasing the company's legal exposure. There are already signs that these legal challenges carry real financial risk. New Mexico recently won a $375 million judgment against Meta, and a separate federal trial is scheduled to begin early next year.

The AI opportunity is also far from guaranteed. Today, investors are rewarding companies that appear to be winning the AI race, but the competitive landscape is becoming more crowded every quarter. OpenAI, Anthropic, Google, Microsoft, xAI, and others are investing billions of dollars to develop better models and attract developers. Meta has responded aggressively by spending heavily on infrastructure and recruiting top AI researchers, but there is no guarantee those investments will generate returns that justify the enormous capital being

deployed. A big problem is today's leader in AI can quickly become tomorrow's follower if innovation slows. I also believe that all of these companies will not succeed in this space, which will mean enormous amounts of wasted capital for the losers.

Wall Street seemed to be focused almost entirely on Meta's AI upside last week, and that optimism may continue to drive the stock higher. But investors should remember that valuation is increasingly dependent on AI execution while regulatory scrutiny remains elevated. If AI spending fails to produce the expected returns or regulators force changes that weaken engagement, today's bullish narrative could change quickly.

Meta remains one of the strongest companies in technology, but even great businesses are not risk-free. As investors, it's important to weigh both the opportunities and the risks, not just the headlines driving the stock higher today.

The spring home sales season disappointed in June

The spring home-selling season ended on a disappointing note. Through May, existing home sales had been showing signs of improvement, and many real estate professionals were becoming more optimistic about the housing market. However, June's data told a different story.

The conflict involving Iran contributed to higher inflation expectations and pushed mortgage rates higher, weighing on buyer demand. Existing home sales fell 2.4% in June to a seasonally adjusted annual rate of 4.09 million homes, well below economists' expectations for a 0.7% increase.

Despite the monthly decline, the longer-term trend remains somewhat more encouraging. Existing home sales were still up 2.8% compared with a year ago, suggesting that underlying demand has not disappeared. There continues to be pent-up demand from prospective buyers, but many seem unwilling to make such a large financial commitment while borrowing costs remain elevated, even as housing inventory continues to improve

According to Freddie Mac, the average 30-year fixed mortgage rate was 6.43% last week. If mortgage rates remain near these levels, many prospective homebuyers may continue to delay their purchases, preventing a stronger recovery in the housing market.

Another Hidden Cost of AI: Steel

Most people know that the AI buildout has driven up demand for advanced computer chips, contributing to higher prices for smartphones, laptops, and other electronics. They also know that AI data centers require enormous amounts of electricity, putting upward pressure on utility rates as more power is diverted to support AI infrastructure.

But there's another cost that receives far less attention: steel. Steel is a critical component of every data center. Industry estimates suggest that new data centers will consume roughly 1 million tons of steel annually, representing approximately $1.4 billion in demand. Steel is used throughout these facilities from the structural columns, roof joists, and roof decking to the server racks that house thousands of AI processors.

This growing demand has ripple effects throughout the economy. Higher steel demand can contribute to increased costs for automobiles, household appliances, commercial buildings, bridges, and countless other products that rely on steel.

The impact doesn't stop there. Steel production is one of the most energy-intensive manufacturing processes. A single electric furnace steel mill can consume anywhere from around 50 to 200 megawatts of electricity per day, competing for the same power resources as AI data centers. As both industries demand more electricity, utilities face increasing pressure to expand generating capacity.

Ultimately, who pays for that increased demand? The answer is often the consumer. Higher electricity demand can translate into higher utility bills for households and businesses as utilities invest in additional generation and transmission infrastructure. In regions where electricity supply is already tight, the competition for power is becoming even more apparent.

For example, PJM Interconnection, the nation's largest regional transmission organization, plans to begin conducting supplemental power auctions with electricity generators in September to help secure additional supply. Auctions reward the highest bidders, meaning electricity increasingly flows to those willing to pay the most. As large industrial users and AI data centers bid aggressively for power, consumers could face higher electricity prices if supply fails to keep pace with demand.

AI will likely bring enormous productivity gains and economic benefits over the long run. However, it is also creating secondary inflationary pressures that extend well beyond semiconductors. Steel, electricity, construction materials, and other critical inputs are all experiencing increased demand, and those costs eventually work their way through the economy.

As the AI revolution accelerates, these indirect costs are likely to become an increasingly important part of the inflation story.

Inflation Is Cooling... But Don't Pop the Champagne Yet

The latest CPI report was another encouraging sign that inflation is moving in the right direction. Headline CPI declined 0.4% in June, marking the largest monthly drop since 2020, while the annual inflation rate slowed to 3.5% from 4.2% in May. Core inflation, which excludes food and energy, was flat on the month and eased to 2.6% year over year. Much of the improvement was driven by a sharp decline in gasoline and broader energy prices.

While this is welcome news, I'd caution against declaring victory over inflation.

One of the biggest challenges with inflation is that it doesn't always show up in the headline numbers immediately. It often works its way through the economy in waves, especially when it comes to energy.

A good example is my own pool service. My pool guy recently raised his prices, likely for two reasons: higher chemical costs and the increased cost of driving from house to house. Those are both directly tied to energy markets. Even if gasoline prices temporarily fall and help bring down CPI for a month, businesses often adjust prices more slowly because they have to account for prior cost increases and the uncertainty of where energy prices are headed next.

That's why I think investors should remain cautious. The recent improvement in inflation was helped significantly by lower oil and gasoline prices following a temporary easing in geopolitical tensions. But with conflict in the Middle East once again threatening energy supplies and oil prices recently moving higher, that relief could prove short-lived.

The trend is encouraging, and the Federal Reserve will certainly welcome softer inflation data. But as long as energy prices remain vulnerable to geopolitical events, inflation is likely to remain unpredictable. Businesses from manufacturers to small local service providers will likely continue to pass along higher input costs whenever they have to.

One softer CPI report is good news. But sustained price stability will likely require a concrete outcome in the Middle East and more stability in the energy market. While again we welcome the positive news in this CPI report, the conversation around in inflation and what to do with interest rates will continue with the ongoing developments in Iran.

Higher Gas Prices Aren’t Stopping the American Consumer

If you were looking for evidence that higher gas prices are slowing down the American consumer, the latest retail sales report doesn’t provide much support.

The headline number was relatively modest, with retail and food services sales increasing 0.2% from May. But the year-over-year numbers tell a much stronger story.

Total retail and food services sales were up 6.7% from June of last year. Even if you exclude gas stations, which saw an increase of 19.8%, retail sales still grew at an impressive rate of 5.7%. More importantly, when you look across the major spending categories, not a single major category declined year over year. Furniture and home furnishing stores was the only major category that was flat compared to last year, but again it wasn’t negative!

Some of the strongest performers included non-store retailers, which primarily includes online shopping, increased 14.2%. Electronics and appliance stores were up 8.6%, while clothing and clothing accessories increased by 4.8%. Building materials and garden equipment stores were up 3.5%

One of the more interesting data points is that Americans are still spending money at restaurants and bars. Food services and drinking places were up 3.8% year over year, showing that consumers continue to spend on experiences and dining out despite higher costs and concerns about the economy.

The big takeaway is that the consumer remains remarkably resilient.

Yes, higher gas prices can eventually put pressure on household budgets. But so far, consumers have continued to spend across virtually every major category. The year-over-year numbers show broad-based growth, not just spending concentrated in one or two areas.

The consumer may be under pressure, but they are clearly not out of the game yet.

Financial Planning: What’s Next for Social Security

The Social Security Trustees’ most recent solvency report highlights the need for Congress to address the program’s long-term funding shortfall. Under current projections, the retirement trust fund is expected to be depleted in 2032, at which point ongoing payroll tax revenue would be sufficient to pay only about 78% of scheduled benefits unless legislative changes are made. Importantly, this does not mean Social Security will become insolvent or stop paying benefits, it means benefits would be reduced if Congress takes no action. While no specific legislation has emerged, many policy experts expect Congress to adopt a combination of gradual reforms rather than a single sweeping change.

Potential solutions include increasing the Social Security payroll tax rate from 6.2%, raising or eliminating the taxable wage cap from $184,500, increasing the full retirement age from 67 for younger workers, and slowing future benefit growth for higher-income retirees.

Historically, when Congress has made changes to Social Security, it has phased them in over many years, and most proposals would leave current retirees and those approaching retirement largely unaffected. As a result, individuals already receiving benefits or those within roughly the next decade of retirement are generally expected to experience little or no change, with the majority of reforms likely to apply to younger generations who have more time to prepare.

Autonomous Vehicles Face a Setback from the National Highway Traffic Safety Administration

It appeared that autonomous vehicles and robotaxis had a clear path forward, with rapid expansion expected across the United States. Last week, however, Jonathan Morrison of the National Highway Traffic Safety Administration (NHTSA) threw a wrench into those plans.

Morrison highlighted documented incidents in which autonomous vehicles entered active emergency scenes, blocking ambulances and fire trucks from reaching their destinations. According to the NHTSA, some autonomous systems have struggled to recognize flashing emergency lights, traffic cones, road closures, smoke, and other hazards that human drivers would instinctively avoid.

I don't know all of the technical details behind the technology, but this seems like the type of software issue that could be addressed through continued development and testing. The challenge is that these systems must perform correctly every time, especially in situations where lives are at stake.

Robotaxis are already operating in Texas, California, Arizona, and a handful of other states. Waymo, owned by Alphabet, is currently the industry leader with a fleet of nearly 4,000 autonomous vehicles. Their driverless cars are hard to miss, thanks to the array of cameras and sensors mounted around each vehicle, and they are already operating in 11 cities.

Waymo has also announced plans to expand service to Denver, Las Vegas, San Diego, and Tampa in the coming weeks. Despite the recent regulatory concerns, the long-term growth opportunity remains significant. By 2030, the U.S. is projected to have approximately 63,000 commercial robotaxis on the road, creating an industry worth an estimated $19 billion.

Technology continues to improve, but the recent concerns raised by the NHTSA serve as a reminder that safety must come before widespread adoption. Autonomous vehicles may still represent the future of transportation, but gaining public trust will depend on proving they can safely handle the unexpected.

Some Alcohol Companies Now Trade at Valuation Multiples Similar to Tobacco Stocks

Alcohol companies are going through a difficult period as consumption continues to slow. In some cases, their valuation multiples have fallen to levels typically associated with tobacco companies, despite the fact that cigarettes are known to give people cancer. Tobacco is also heavily taxed and certain states have increased those taxes dramatically within the last five years increasing cigarettes prices anywhere from 35 to 45% depending on the state.

The alcohol industry is facing several headwinds. Americans have been drinking less over the past four years, and younger consumers are changing their habits. According to a 2025 Gallup poll, only 54% of Americans reported drinking alcohol, a noticeable decline from prior years. Many members of Gen Z are choosing to have just one or two drinks before calling it a night, while others are opting for alternatives such as marijuana or THC-infused beverages.

Higher prices at bars and restaurants have also weighed on demand. Analysts estimate that the cost of spirits served in bars and restaurants has increased roughly 29% over the past five years. In many cities, paying $20 for a cocktail is no longer unusual as establishments pass along higher labor, rent, insurance, and ingredient costs.

Ironically, drinking at home remains relatively affordable. Alcohol prices at grocery stores and liquor stores have risen only about 9% over the same period, making home consumption a much better value than ordering drinks while out.

One bright spot for the industry is the rapid growth of ready-to-drink (RTD) cocktails. This category is expanding at roughly 25% annually in the United States, and even younger consumers appreciate the convenience, consistent taste, and affordability. A 12-pack of RTD cocktails often sells for around $25, making it an attractive alternative to spending $20 on a single cocktail at a bar.

The alcohol industry isn't disappearing anytime soon, I believe it is simply evolving. Consumer preferences change over time. Remember when craft beer dominated the market? Then hard seltzers became the hottest trend. Now RTDs are taking market share. The companies that successfully adapt to these changing preferences are likely to remain strong competitors.

From an investment standpoint, the recent decline in many alcohol stocks has pushed dividend yields higher while valuations have become increasingly attractive. For long-term investors with a three- to five-year time horizon, today's pessimism may present an opportunity. High-quality alcohol companies with strong brands, global distribution networks, and solid cash flows could reward patient investors once consumer spending and sentiment improve.

Trading Cards Have Turned into Gambling….and There’s No Age Limit!

I remember growing up buying baseball trading cards with a stick of gum inside. Topps would include the gum as an incentive for kids to buy the cards. That was then. Today, the trading-card business is an entirely different ball game.

No one cares about the gum anymore. Trading cards, including baseball cards and Pokémon cards, have become a multibillion-dollar industry. The collectibles market is now estimated to be worth around $100 billion, with trading cards surpassing other collectibles, including luxury handbags.

Topps, which had been in business for 88 years, was acquired four years ago by Fanatics. While card collecting became popular through baseball cards, Pokémon cards have become especially popular among teenagers. A Pikachu Pokémon card from 1998 recently sold for a record $16.5 million. Yes, you read that correctly. It is reportedly the most expensive trading card ever sold at auction.

The industry has become so popular that Professional Sports Authenticator, or PSA, which authenticates trading cards, has reportedly faced a backlog of millions of cards waiting to be graded.

Since 2020, some Pokémon card prices have increased more than 1,600%, attracting even more people who are willing to keep bidding prices higher. And this is where I believe the line between collecting and gambling starts to become blurred.

The problem is that many of the people participating in this market are teenagers, high school students, college students, and others who may not have the financial resources to take on significant losses. Yet there is no age limit to participate. A young person can spend hundreds or thousands of dollars chasing the next valuable card, hoping that prices continue to rise.

I would venture to say that, someday, this market will experience a major collapse as money becomes tighter and the economy slows. Unfortunately, the people who can least afford to lose money may be the ones who suffer the most.

This trading-card craze has become so crazy that maybe it’s time for Beanie Babies to make a comeback. Maybe they’ll finally be worth something again!