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Meteoric levels of investment in AI infrastructure have sparked concerns that Big Tech’s latest boom is veering into bubble territory. So, is Meta, along with the rest of Silicon Valley, overspending on AI?

“Clearly no Meta executive would ever answer that question with a ‘yes,’” Alex Schultz, Meta’s CMO and VP of analytics, said in an interview with Business Insider at the Web Summit tech conference in Lisbon this week.

Meta plans to spend up to $72 billion this year on AI infrastructure, and has said spending will climb higher next year. CEO Mark Zuckerberg said this year that he’d rather risk “misspending a couple of hundred billion dollars” than be late to the development of superintelligence. Amazon, Google, Microsoft, and privately held AI companies like OpenAI are logging record-breaking capital expenditures on all things AI. That includes chips and data centers, as well as big salaries to attract and retain top AI research and engineering talent.

There are eyewatering sums of money at play, but Schultz said that, compared to historical bubbles, the current trend is not huge as a percentage of the sector’s market capitalization or revenue. Compared to the US railroad bubble of the late 19th century, “it seems aggressive, but not crazy,” said Schultz of the current AI boom.

In an October research note, Goldman Sachs analysts estimated that AI-related investment in the US is under 1% of GDP, compared with the 2% to 5% of GDP reached during earlier technology booms, including the railroad expansion.

Schultz said Meta’s AI investments are already translating into billions of dollars in revenue for the company, as they improve its advertising tools and content ranking algorithms. Meta is expected to ring in around $200 billion in revenue this year and is trading at a market cap of about $1.5 trillion.

Schultz said the biggest AI-powered revolution for Meta has been its more sophisticated content recommendation system. He said this was necessary because the majority of time spent on Facebook and Instagram now is people looking at “unconnected content” — content that isn’t from a friend, or from a page or group you actively follow.

“If we hadn’t made that pivot, how much smaller would we be as a company today?” Schultz said. “We managed a massive disruption without becoming irrelevant, and it is incremental to our business.”

Schultz said the Meta AI app’s newly released Vibes feed — a feed of short-form, purely AI-generated video content — represents “probably a large chunk of the future” for the company and has demonstrated “good retention” of users so far once they use it. (Vibes has been panned by many online as “AI slop.”)

Video-generation models require more computing power than text or image ones, creating huge energy demands that have the potential to strain power grids and water supplies. The popularity of apps like OpenAI’s Sora has sparked questions about whether the entertainment value is worth it for the environmental trade-offs.

“Vibes isn’t that big — it’s not draining lakes or using multiple nuclear power stations,” Schultz said. He added that it’s one of many experiments the company is working on to train and learn from its AI models.

“There’s sort of this Western European Calvinist streak to society that’s like, doing nice things that are fun is not what life’s about,” Schultz said. “And life is about doing nice things that are fun, and we do all the other stuff so that we can do nice things that are fun.”

The AI wave has prompted what Schultz described as productive conversations about the safety of nuclear power stations and the use of desalination plants to produce freshwater from seawater.

“In general, humanity has the ability to have a lot more abundance than it does,” Schultz said.

Mitsubishi Electric (TSE:6503) shares have seen some movement recently, sparking fresh interest in the company’s fundamentals and long-term outlook. Investors are considering the latest trends that could shape the next phase for this well-known Japanese industrial player.

See our latest analysis for Mitsubishi Electric.

The share price has surged over 57% year-to-date, reflecting a strong shift in sentiment that is also evident in the stellar 57% total shareholder return over the past year. While recent weeks saw a slight dip, long-term investors have enjoyed remarkable multi-year gains, suggesting that momentum is still in Mitsubishi Electric’s favour as the market responds to its latest moves and ongoing innovation.

If you’re interested in expanding your search beyond industry giants, it could be the perfect time to discover fast growing stocks with high insider ownership.

With the stock not far from analysts’ price targets, investors are left to debate whether Mitsubishi Electric is still trading at an attractive value or if optimistic future growth is already factored in.

With the current share price sitting notably above its consensus fair value, Mitsubishi Electric’s most discussed narrative points to a premium market valuation. Investors are weighing whether recent performance and bold growth projections truly justify this level.

Expansion in the Energy Systems and Public Utility segments is driven by ongoing investments in power distribution and the transition toward electrification and energy efficiency, supported by worldwide decarbonization initiatives. This should result in higher recurring revenues and improved net margins as Mitsubishi Electric benefits from secular shifts to sustainable infrastructure.

Read the complete narrative.

Curious about what financial assumptions drive this ambitious outlook? The real story hinges on projected gains in revenue and profitability, as well as future profit multiples that hint at a tech-level growth premium. Want to know exactly which performance levers are moving the fair value target? Uncover the surprising factors that may shape Mitsubishi Electric’s valuation narrative.

Result: Fair Value of ¥3,668.38 (OVERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, intensifying competition and rapid shifts toward digital solutions could challenge Mitsubishi Electric’s profit margins and limit its ability to sustain recent growth.

Find out about the key risks to this Mitsubishi Electric narrative.

Looking at earnings multiples, Mitsubishi Electric trades at 21.9 times earnings, which is lower than the peer average of 23 times. However, it is noticeably higher than the Japanese Electrical industry at 13.8 times. The fair ratio stands even higher at 26.5 times, suggesting some room to grow if the market becomes more favorable, or risk if sentiment weakens. Do multiples clarify whether the stock is a bargain, or do they simply add to the debate?

See what the numbers say about this price — find out in our valuation breakdown.

If you see things differently or enjoy digging into the numbers yourself, you can build your own take in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Mitsubishi Electric.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include 6503.T.

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