Meta’s Superintelligence Labs Unveils First AI Models as Shares Trade at 20x Forward Earnings
Meta’s Superintelligence Labs delivered its first AI models in six months, marking early internal‐use milestones for text and image tools, CTO Andrew Bosworth said. Shares are down 8.5% YTD despite 26% revenue growth and a $60bn AI ad run rate, trading at 20x forward earnings, the lowest among Magnificent Seven.
1. Executive Criticizes EU Regulation on AI
Meta’s Vice-Chair Nicola Mendelsohn publicly challenged European regulators for the first time this week, warning that stringent new rules are slowing the company’s ability to roll out and scale advanced AI products across its platforms. Speaking at the World Economic Forum in Davos, she described the regulatory environment as a “real and present issue” that risks stifling innovation and putting Europe at a competitive disadvantage. Investors should watch for potential shifts in Meta’s go-to-market strategy for AI tools in the region, as well as any lobbying efforts the company may undertake to shape draft legislation.
2. In-House AI Lab Hits Early Milestones
Meta’s recently established Superintelligence Labs has already produced its first internally tested AI models just six months into its mandate, according to CTO Andrew Bosworth. The prototypes—codenamed Avocado for text generation and Mango for image and video processing—have shown comparable performance to external offerings, marking a key validation of Meta’s decision to invest heavily in proprietary AI research. For investors, early delivery of these models suggests Meta could reduce reliance on third-party suppliers and accelerate the rollout of new monetizable features in advertising, content recommendation and Reels.
3. Strong Revenue and Engagement Growth Driven by AI
During the third quarter Meta reported year-over-year revenue growth of 26%, driven in large part by enhancements to its AI-powered ad ranking systems. Management disclosed that AI-enhanced ad tools now generate an annualized run-rate exceeding $60 billion, while the company’s consumer-facing AI assistant has surpassed one billion monthly users across Facebook, Instagram and WhatsApp. These metrics underscore the growing contribution of AI to both top-line growth and user engagement—key value drivers for a company heavily reliant on ad monetization.
4. Attractive Valuation and Capital Spending Plans
Despite a roughly 9% decline in share price so far this year, Meta continues to trade at a conservative multiple of 27 times trailing earnings and 21 times forward estimates. The company plans to increase capital expenditures from approximately $70 billion in 2025 to over $100 billion in 2026 to support AI compute infrastructure. While aggressive spending presents execution risk, the current valuation appears to price in these headwinds. For long-term investors, the pullback represents an opportunity to gain exposure to one of the largest beneficiaries of the generative AI trend.