Cisco’s past peak offers caution for AI investors

During the dot-com boom, Cisco, a key provider of internet infrastructure like routers and switches, experienced explosive growth. Its stock price surged roughly 4,000% between the end of 1994 and March 2000, fueled by investor anticipation of future growth. The company’s valuation reflected this optimism, with a price-to-earnings ratio exceeding 200 and an enterprise value-to-sales ratio of 31.

The subsequent collapse of the Nasdaq Composite in 2000 severely impacted Cisco. The stock price plummeted 87.11% from its March 2000 high, reaching a low of $10.32 on October 11, 2002. This represented a loss of approximately 90% of the company’s market value, which shrank to around $60 billion.

It took over a quarter of a century for Cisco to recover. The company finally achieved a new closing high on December 10, 2025, at a price of $80.25. While Cisco didn’t pay a dividend until 2011, investors who held onto their shares have since benefited from a growing dividend stream and share buybacks. Despite this, the company’s market value remains roughly $250 billion below its 2000 peak, and early investors experienced a period of inflation-adjusted losses.

Throughout this period, Cisco continued to grow its business. Revenues nearly quintupled, profits quadrupled, and earnings per share grew eightfold, demonstrating the company’s underlying strength.

Today, Cisco is a supplier of AI infrastructure, with fiscal 2026 revenue reaching $63.3 billion and $9.3 billion in AI infrastructure orders. The company anticipates $7.5 billion in AI infrastructure revenue for fiscal 2027. “Cisco is well-positioned as the critical infrastructure for the AI era,” stated Chair and CEO Chuck Robbins. The stock reached an intraday record of $119.36 on May 14, 2026, and currently trades at $94.89, up 25.43% year-to-date but down 12.62% in the past week.

Analysts often draw comparisons between Cisco and Nvidia (NASDAQ:NVDA), the current leader in AI hardware. Nvidia’s market value stands near $4.556 trillion, with fiscal second-quarter revenue soaring 105.85% year-over-year to $96.22 billion. While Nvidia trades at a more reasonable 37 times earnings compared to Cisco’s peak valuation, its shares have fallen 21.14% in the past month.

The Cisco experience highlights the risks of investing in companies at the peak of a technological boom. Investors should be mindful of valuations and potential corrections, especially given the significant weighting of AI companies in major indexes. The company is scheduled to report earnings again on November 12.