Cisco Systems (CSCO.US), a bellwether stock of the internet technology revolution, has finally reclaimed its all-time high after a quarter-century, with its recent rally partly driven by the artificial intelligence (AI) spending surge. On Wednesday, the stock rose 0.9% to close at $80.25, surpassing a peak that had stood for over 25 years.
The previous record high, set on March 27, 2000, is widely regarded as the pinnacle of the dot-com bubble and a benchmark the tech-heavy Nasdaq 100 Index struggled to reach until late 2015. "This serves as a gentle reminder that recovery from a bubble can take an extended period," said Dirk Malakhi, Managing Director at SLC Management. "A ready parallel is Japan's stock market, which also took decades to rebound from its late-1980s bubble. Once investor confidence is shaken by painful sell-offs, it may take years to regain trust."
Wednesday's gain came amid a broad market rally following the Federal Reserve's third consecutive rate cut. The S&P 500 advanced 0.7%, while the Nasdaq 100 climbed 0.4%. Cisco's milestone has drawn comparisons between the current "Magnificent Seven"-led rally and the late-1990s tech boom, when Cisco, alongside Microsoft, Intel, and Dell, formed the "Four Horsemen of the Nasdaq," capturing massive investor attention.
In the two years leading to its 2000 peak, Cisco's stock soared nearly 600%, propelling its market capitalization above $500 billion. When the bubble burst, the company lost about 90% of its value, bottoming at roughly $60 billion by late 2002. Since then, Cisco shares have rebounded over 800%, though its current market cap remains more than 40% below its dot-com era zenith.
Malakhi described the stock's recovery as "a marker of regained confidence," adding, "though they've evolved more into a 'utility' company than an innovator. Presumably, that's what their investors now prefer."
The latest catalyst for Cisco's ascent came last month with an upbeat revenue forecast, fueling optimism that AI-related expenditures could accelerate growth in coming years. The San Jose-based firm has been repositioning itself to capitalize on the tens of billions corporations are spending on AI infrastructure. It projects current fiscal year sales (ending July) to reach $61 billion, exceeding Wall Street estimates by approximately $1 billion.
UBS analyst David Vogt upgraded Cisco to "Buy" ahead of its Q1 earnings, citing demand for AI infrastructure products. However, skepticism persists on Wall Street about whether the broader AI spending frenzy can maintain its breakneck pace and whether accounting practices properly reflect related investments.
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