AppLovin Shares Plummet 12.22% Amid Allegations of Unethical Practices and AI Deception

On February 26, AppLovin faced a significant decline in its stock value, with shares dropping 12.22%. This marked the seventh consecutive day of losses, resulting in a cumulative 35.11% decline over the past week. The stock reached its lowest level since November 2024 during trading.

The sharp fall is attributed to two lesser-known firms, Fuzzy Panda Research and Culper Research, each publishing reports shorting AppLovin on the same day. These reports have cast shadows over AppLovin, which had been celebrated for its use of artificial intelligence in its applications. The companies accused AppLovin of employing unethical tactics, potentially tarnishing its reputation as one of Wall Street's favorites in the realm of advertising technology.

AppLovin has been hailed for its remarkable financial growth, driven by what the company portrays as innovative use of its machine learning algorithm, Axon 2.0. This algorithm connects advertisers with developers and has allegedly been pivotal to the company's success. However, the short reports argue that Axon 2.0 may be nothing more than a façade, powerfully critiqued as a “house of cards” dependent on illusory ad fraud practices.

The allegations suggest AppLovin's rapid expansion might be unlawfully bolstered through partnerships allowing forced application installations and manipulation of e-commerce advertising exposure involving major platforms. The reports challenge the company’s integrity, asserting that its business model might be constructed on potentially unsustainable foundations.

The possibility of major platforms like Apple, Google, and Meta intervening to address and halt AppLovin's practices presents a serious risk of heightened regulatory scrutiny. Such measures could imperil the company's access to app store ecosystems, threatening its operational viability.

With market skepticism mounting, investors are urged to exercise caution. This serves as a sober reminder that the sheen of technological innovation can sometimes mask regulatory and ethical oversights that, once exposed, may lead to abrupt devaluations.