Cisco Stock Slumps 20% Amid Profit-Taking and AI Infrastructure Demand
Cisco Systems stock has continued its downward trend since May, plummeting to $105 and erasing billions of dollars in value. This decline comes after a recent rally stalled and investors booked profits, with the company's market capitalization falling from $513 billion to $414 billion.
The networking giant's revenue and profits surged in the last quarter, driven by ongoing demand for its solutions, particularly AI infrastructure orders which jumped to $4 billion. The annual increase in this area reached $9.3 billion, with guidance suggesting continued growth.
According to JPMorgan's Jamie Dimon, AI spending from hyperscalers is expected to hit over $1 trillion next year, with Cisco Systems predicting its AI infrastructure revenue will jump to $7.5 billion this year.
The company's forward guidance is optimistic, with revenue projected between $18 billion and $18.2 billion for the current quarter. Analysts are generally bullish on the stock, with 16 out of 22 analysts having a 'buy' rating and an average estimate of $119 per share, which is 12% above the current level.
Despite this optimism, the short-term outlook for the stock appears bearish, with the next key target being at $100. In the long term, however, the stock may bounce back and retest its all-time high of $130.