Key insights
- The article draws a parallel between Cisco's 2000 dot-com bubble peak and current tech valuations, particularly in AI infrastructure. While Cisco's P/E was significantly higher in 2000, the current rapid ascent and high P/E (40) raise concerns about a potential bubble driven by an AI 'arms race' and speculative investor behavior. The author questions if aggressive spending is necessary for innovation or indicative of unsustainable excess, suggesting a bearish outlook due to potential overvaluation and speculative froth.
Is history repeating itself? Cisco in 2000 vs. today:
Cisco went up about 320% from October 1998 to March 2000 before crashing.
So far, Cisco is up about 147% from July 2024 to June 2026, and its P/E ratio is still around 40. By comparison, in 2000, right before the crash, Cisco’s P/E ratio was around 222.
Do you think we are heading into another major bubble?
Right now, it feels like there is an arms race among the big tech companies over who can build the bigger, faster, and better AI infrastructure. This could easily get out of control. Companies may end up spending more simply because their competitors are spending more, without carefully evaluating whether that level of spending will actually generate enough long-term returns.
It also seems like many investors are now just trying to find the next stock that will rise exponentially, rush in, double or triple their money, then dump the stock and move on to the next opportunity.
On the other hand, I guess that to build the next generation of technology and innovation, we may actually need some of this aggressive, seemingly out-of-control spending?