Meta Platforms, Inc. has discontinued its newly launched AI image-generation feature, Muse Image, following criticism over privacy concerns and its default use of public Instagram photos. The decision comes after users and advocacy groups, including SAG-AFTRA, raised alarms about the potential for nonconsensual digital replicas. The move highlights the growing scrutiny tech companies face regarding data privacy and AI ethics.

Meta Reverses Course on AI Tool

On Friday, Meta updated its blog post to announce the removal of the AI feature introduced earlier this week. The tool, part of Muse Image—the company’s first image-generation model from Meta Superintelligence Labs—was integrated into the Meta AI chatbot. It allowed users to generate and edit AI-created images using public Instagram photos as input. Critics argued the feature was enabled by default rather than requiring users to opt in.

Meta stated its intent was to provide a useful creative tool and give people control over their public content. However, the company acknowledged the backlash, saying, “We’ve heard the feedback that this feature missed the mark, so it’s no longer available.”

Privacy Concerns and Industry Backlash

The feature drew widespread criticism over concerns that it could enable AI-generated digital replicas without clear user consent. Emmy-winning actor Hannah Einbinder criticized the feature on Instagram, noting it was turned on automatically and urging followers to disable it. SAG-AFTRA, the union representing actors and media professionals, also urged members and Instagram users to opt out, arguing that anything other than a clear opt-in for AI use of users’ images was “an utter miscalculation of public sentiment.”

Following Meta’s decision to discontinue the feature, SAG-AFTRA welcomed the move. A spokesperson for the union said, “With the dangers of nonconsensual digital replicas well known to all, a feature that encouraged that behavior is unwise. We appreciate its discontinuance. It is the responsible thing to do.”

Market Reaction

Meta shares closed Friday up 5.97% at $669.21 during the regular session, before slipping 0.18% to $668.02 in after-hours trading. According to Benzinga Edge Stock Rankings, Meta ranks in the 88th percentile for Growth. While the stock has lagged over the long term, it has posted strong momentum in the short and medium term.

Pershing Square Capital Management's investment in Meta Platforms has gained nearly $20 million in 2026, marking a positive turn for the position after earlier volatility. The stake, initiated in the fourth quarter of 2025, is now worth $1.78 billion, reflecting a modest recovery from earlier losses. The gain represents a small but notable improvement for the hedge fund's sixth-largest holding.

Ackman announced the new stake in Meta during an investment presentation in February 2026, ahead of the official 13F filing disclosure. Pershing Square Capital Management purchased 2,673,569 shares in the fourth quarter, later reducing the position slightly to 2,660,861 shares in the first quarter. The exact purchase date remains unknown, though analysts point to November following Meta's third-quarter earnings report.

Meta stock traded between $581.25 and $759.19 in the fourth quarter, with the low set on Nov. 19, 2025, and the high on Oct. 29, 2025. Based on these prices, the stock is down 12.1% from the fourth quarter high but up 14.8% from the lows. Using the end of the fourth quarter as a baseline, the position was worth $1,756,407,737.49 at the end of 2025 and has since risen to $1,776,204,543.33.

The Meta stake represents approximately 11% of Pershing Square's assets, making it a significant but not dominant holding. Ackman has expressed strong bullishness on Meta, citing its leadership in digital advertising and potential as a beneficiary of AI integration. "We believe Meta's current share price underappreciates the company's long-term upside potential from AI," Pershing Square stated in its presentation.

A second-quarter 13F filing, expected by Aug. 14, will reveal whether Pershing Square has maintained or adjusted its Meta position. Ackman has recently increased his bullishness on Meta and Microsoft Corporation while selling stakes in Alphabet Inc. Investors are watching closely to see if these bets will pay off as the Magnificent Seven stocks continue to diverge in performance.