Cisco must steel itself for the coming AI bust

Six years ago, when the pandemic raged and people were confined indoors, Cisco sold almost nothing to the so-called hyperscalers, the giant data center companies that today account for a huge share of the stock market’s value. Amazon, Google and Microsoft preferred to buy white boxes, unbranded servers built with off-the-shelf components, or deal with Cisco rivals like Arista. “If you go back just over six years, we had virtually no business with them inside their data centers,” reflected CEO Chuck Robbins on a call with analysts this week.

The turnaround he has led and the current AI boom put Cisco in a very different situation now, to Robbins’ evident delight. “I want to make sure we’re not thinking that we’re accidental recipients of what’s going on in this AI transition, particularly as it relates to the hyperscalers,” he told analysts at the end of his call about the company’s latest financial results. “Through a combination of key investments and acquisitions that we made in…