AI and Meta Deal Fuel 200% Rally, But Overvaluation and Crowded Narrative Heighten Downside Risk

What happened

Corning's stock has surged 204% over the past year, propelled by AI-driven demand for optical connectivity and a multiyear up to $6 billion agreement with Meta, as highlighted in recent coverage. However, this rally has elevated valuation to extreme levels, with a P/E of 78.3 and EV/EBITDA of 35.7, far exceeding historical norms and offering no margin of safety, per the DeepValue report. Filings lack critical disclosures on backlog, customer concentration, and shipment cadence for the Meta deal, forcing investors to rely on external hyperscaler capex signals that remain uncertain. Market sentiment is now overwhelmingly crowded around the AI data-center narrative, increasing vulnerability to any demand digestion or capex moderation, reminiscent of past tech cycles. While fundamentals improved in 2025 with sales up to $15.63 billion and free cash flow of $1.48 billion, the current price embeds optimistic assumptions about sustained growth that may not materialize without more visibility.

Implication

The stock's surge reflects a crowded market narrative shift rather than proportional operational certainty, leaving it highly sensitive to any moderation in hyperscaler capex or lack of visible Meta deal conversion. Key near-term risks include potential capex resets from major builders like Meta and Amazon, undisclosed shipment cadence for the Meta agreement, and China trade restrictions impacting optical volumes. Over the next 6-12 months, monitoring Q1 2026 guidance compliance and any new disclosures on customer mix will be critical to validate the investment thesis and justify the premium multiple. Even with improved cash flow and manageable leverage, the high valuation means any disappointment could trigger sharp corrections, as highlighted in the DeepValue report's potential sell rating. Thus, prudent strategy involves cautious positioning, trimming above $160 as suggested, and awaiting clearer evidence before adding exposure.

Thesis delta

The news article reinforces the market's focus on AI and the Meta deal as rally drivers, but it does not shift the core thesis from the DeepValue report. The call remains a potential sell due to overvaluation, lack of margin of safety, and persistent visibility gaps, with no new information addressing critical disclosure shortcomings or reducing demand uncertainty.