Cisco Stock Dips 20% to Lowest Since May as AI Super Cycle Drives Growth

Cisco Systems stock has slumped to its lowest level since May 13, dropping by 20% from its highest point this year. The company's market capitalization fell from $513 billion to $414 billion as a result of the decline. Cisco's revenue and profits continued to soar in the last quarter, with revenue jumping by 18% to $17.3 billion.

The growth was driven by demand for the company's solutions from hyperscalers, which saw AI infrastructure orders jump to $4 billion. This brought the annual increase to $9.3 billion and indicates that this trend will likely continue in the near term as the AI supercycle gains momentum.

JPMorgan's Jamie Dimon expects AI spending from hyperscalers to hit over $1 trillion next year, up from $750 billion this year. Cisco Systems also saw strong demand from neocloud, sovereign and other enterprise customers, leading the management to boost its forward guidance.

The company predicts that this quarter's revenue will soar to between $18 billion and $18.2 billion, with the average estimate among analysts indicating a 15.5% annual revenue growth this year followed by $78 billion next year. However, Cisco's momentum is lower than other IT companies like Micron and SanDisk.

Cisco Systems is fairly valued, with a forward price-to-earnings ratio of 21, slightly higher than the S&P 500 Index average of 20 but lower than the sector median of 23.