Smart Money Sells Cisco as AI Trade Fizzles Out

The Dow's top performer this year has been Cisco Systems Inc (NASDAQ:CSCO), which has surged about 50% in value. However, upon release of its earnings report, the stock saw a significant drop. The reason for this is that smart money sold into the strength, as they are aware that anything widely published offers no edge.

The commentary from Cisco's earnings report was very positive, showing surging demand for AI data centers, but the gross margin for the quarter was lower than expected at 66.3% compared to 68.4% last year. Wall Street analysts uniformly raised their targets after the release of the report.

This behavior by smart money has implications beyond individual stocks, as it shows that they are aware of and adjusting to potential risks in the market. In contrast, the 'momo crowd' is more focused on short-term gains and does not account for risk.