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To me the most sobering cautionary tale from the dotcom bubble is the story of Cisco. Cisco manufactured, in a very real sense, the physical infrastructure of t

To me the most sobering cautionary tale from the dotcom bubble is the story of Cisco. Cisco manufactured, in a very real sense, the physical infrastructure of the internet: the routers, switches, modems, etc. that directed the IP packets to their destinations. (To a significant extent they still do, though nowadays they have more competition in that area.) Savvy investors piled in to the stock, reasoning that, while internet startups might come and go, the internet itself was surely here to stay. It was popular to observe that, in the California gold rush of the mid-1800s, the purveyors of mining equipment made it rich more reliably than the prospectors for gold. Anyway the Cisco stock price peaked in March 2000, and to this day it still has not reached that level again. The savvy investors were of course correct in their belief that the internet would continue to be important, and that Cisco would continue to be an important manufacturer of internet networking equipment. But they lost money anyway, because once the euphoria had worn off the market consensus was that the stock just wasn’t worth as much as the price it had been selling for at the height of the mania. Any parallels to hot contemporary stocks are left as an exercise for the reader — and I do not mean to suggest that history must always repeat exactly.

smallmancontrov 2y ago
Obviously you don't mean NVIDIA, because 80% margins on matrix multiplication will last foreverrrrr.
- dehrmann 2y ago
  And I can't name several customers with very deep pockets working on their own chips to squeeze/compete with NVDA.
  - alephnerd 2y ago
    > And I can't name several customers with very deep pockets working on their own chips to squeeze/compete with NVDA. Google, Amazon, and Microsoft all have custom ASIC and TPU projects in their pipeline, and what holds true today might not hold true in 5 years. A major reason Nvidia was able to do so well was because of technical outreach by donating their GPUs to programs all over the US, building a strong albeit self serving OSS relationship, the CUDA ecosystem, and the acquisition of Infiniband. Much of these advantages can be nullified by competitive margins and pricing for hyperscalers designed and owned hardware. Cisco was hit by this same situation as server vendors like Dell began integrating their own in-house networking functionality within their servers, and Dell itself was outcompeted by cloud vendors.
    - smallmancontrov 2y ago
      Agreed, the only thing I'd add would be AMD's self-sabotage. Pretending to have compute capability (see also "right around the corner") for over a decade when it was actually so broken as to be sub-viable was an enormous own-goal that they doubled down on when they exited desperation mode without rehydrating the teams and tripled down on with the RDNA/CDNA split. By rights they should have been fast followers, but they stacked the critical mistakes so high that frankly I think NVIDIA's subsidized GPGPU classes are the smaller part of this story. If the people struggling to get OpenCL to work had been able to get it to work (on other than NVIDIA GPUs lol) the situation would look very different today.
    - JKCalhoun 2y ago
      And I'd be surprised (disappointed) if AAPL were sitting on their hands.
  - roenxi 2y ago
    I think you're not naming entire nation states, given the way the Chinese are splashing money around there it looks like there is about to be a flood of chipmaking capacity hitting the market and a lot of that will end up competing in matrix multiplying. Although I hear VCs are working on an algorithm where they burn money directly and the smoke patterns represent the solution to the multiplication. That might keep the margins high.
    - smallmancontrov 2y ago
      Those Chinese companies will have to fight our western champions, TSMC in a green trenchcoat, TSMC in a red trenchcoat, TSMC in a blue trenchcoat, TSMC in a purple trenchcoat, and TSMC in a yellow trenchcoat.
      - selimthegrim 2y ago
        Is this after the same Spidermen TSMCs got down from all sitting on top of each other?
    - randmeerkat 2y ago
      > Although I hear VCs are working on an algorithm where they burn money directly and the smoke patterns represent the solution to the multiplication. That might keep the margins high. This has been bothering me for some time now. It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t… Do VCs really have no standard for due diligence, do they really just not care, or is there something else at play that I’m missing…?
      - paxys 2y ago
        > It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t So I assume you are a multi-billionaire, right?
        kasey_junk 2y ago
        You could know precisely what to invest in but not have access to the funds or deal flow and not be successful.
  - diamond559 2y ago
    Microsoft, Meta and Oracle already spend billions on supposedly completely inferior(according to the Nvidia cultists) AMD chips. Nvidia is the biggest bubble in human history.
    - 8ytecoder 2y ago
      That’s got to be Tesla. Nvidia’s PE is still half that of Tesla.
      - schmidtleonard 2y ago
        PE isn't a cheat code to rational stock valuation, it's the "nothing ever changes" assumption dressed up in a formula. PE looks at past earnings, while the price of a stock buys its future earnings. A modest PE on NVDA says "I expect datacenter revenue to continue" while a modest PE on TSLA would say "I expect robotaxi to fail." These are fair opinions to have, as are their opposites, but if datacenter revenue collapses then today's modest PE won't save NVDA and if TSLA can pull off robotaxi then today's high PE will be vindicated. Stocks are all about Future Earnings, but you can't put that in a column and sort by it so we have PE. You can certainly have success while avoiding high PE stocks, but you are on a site about startups and your name suggests you work in the tech sector, which are both places where high PE often does make sense and it pays to be familiar with the reasons.
        marcosdumay 2y ago
        > a modest PE on TSLA would say "I expect robotaxi to fail." No. Just having competition is enough to destroy the expectations on TSLA. And realistically, they are abut last on that race, being thrown out of track about a decade ago and never managing to make anything work since then. So, yeah, betting on no competition is a very weird option.
        JKCalhoun 2y ago
        Good point. With BMW, Lexus, Audi, Mercedes, Porsche — all with luxury EV's — Tesla really is looking like an also-ran. I'm not in that circle of clientele though so I don't know: are any of these now seen as the luxury electric car?
- doctorpangloss 2y ago
  People choose NVIDIA because of the software. So will software margins go away?
  - JKCalhoun 2y ago
    Just an interested layman here: seems like it's the libraries that people choose. I don't see why those can't be ported to other hardware.
    - duped 2y ago
      They are ported to new hardware, it's just that new hardware is made by NVidia. Part of why their moat is so deep is that they are able to keep the software stack stable with transparent hardware architecture upgrades. It's kind of the opposite of intel.
- deleted 2y ago
  [deleted]
- slowtrek 2y ago
  Cisco did not innovate out of their first incarnation. Nvidia evolved out of gaming gpus, and they didn't do it because they were looking for trends.
  - oldpersonintx 2y ago
    [dead]
  - csomar 2y ago
    Nvidia didn't innovate into AI. Developers used their gaming cards for AI. They kinda got into that situation by pure luck. I wouldn't trust they will be able to pivot into the next big bubble if it's quite outside their area of expertise.
    - est 2y ago
      also crypto mining does tons of SHA256 on CUDA.
      - latchkey 2y ago
        SHA265 hasn't been efficient on a GPU (compared with an ASIC) in over 10 years.
        akimbostrawman 2y ago
        crpto != only Bitcoin. Any cryptocurrency worth its salt is ASCI resistant.
        latchkey 2y ago
        Even ethash had ASICs. As long as there is enough financial incentive, there can always be ASICs built for cheating the system. "Any cryptocurrency worth its salt" would have that incentive.
    - theshackleford 2y ago
- aurareturn 2y ago
  Obviously you don't mean NVIDIA, because 80% margins on matrix multiplication will last foreverrrrr. It won't last forever. The question will always be: Are we in the 1995 or the 2000 of the dotcom era? By 1995, Cisco's stock had already increased 6x since the start of 1993. If you bought at 1995, you'd 10x by its peak. Even after the bust, Cisco's stock was still 50% higher than it was in 1995. The problem with Nvidia's stock isn't demand. The problem is that Nvidia makes something so good and so valuable that the US government has decided to nationalize them by dictating who they can or can't sell to. If Nvidia is freely able to sell to any country they want, their sales and margins would be much higher right now. The demand is that great.
  - diamond559 2y ago
    "AI" isn't even profitable, it is neither good nor valuable outside of for creating a massive asset bubble. The export ban was made by old dinosaurs that don't understand the tech and is more about China than "AI".
    - immibis 2y ago
      LLMs (what you mean by "AI" with the scare quotes) are great at spamming and scamming people.
      - acdha 2y ago
        I’d generalize that somewhat to say that LLMs are good where you can cheaply verify the results relative to the cost of being wrong. A lot of scamming is already structured around most people ignoring their messages, and they don’t support anything so it’s just a question of whether they lose more potential marks than doing it manually. (This is also why coding is one of the areas where they perform best: the cost of structural validation is low and there’s a human in the loop verifying the behavior)
        aaronbaugher 2y ago
        I've tinkered with LLMs, because I keep thinking it'd be cool to have an "assistant" that could research and boil down information for me. The problem is coming up with a question that is A) too complicated to be answered in a single web search that I can do myself as fast as asking the question, and B) not too complicated or important for me to accept the answer without redoing the research myself to verify the answers are correct. For simple questions (How long does the moon take to orbit the earth), a search engine will give the answer right in the results; I don't even have to click through to a page. An LLM can't save me any time there, so I'd only be using it to be using "AI" (which is what I see people around me doing). For difficult or currently controversial questions (What's the best hosting service for my new subscription site, taking into account price, reliability, location, and hardware support?) there's no way I could trust it not to be making shit up. By the time I checked all its work, I might as well have done it myself. So I'd like to usefully use it, but I can't figure out how to use it as more than a curious toy.
- Workaccount2 2y ago
  I'm continually impressed how Google manages to be left out of LLM discussions. I don't know what it is but it always seems like people forget about Google in this space. Google has both cutting edge SOTA AI models and has it's own in-house ai acceleration hardware that is approximately on par with Nvidia. It's why their models are dirt cheap to use and have enormous context.
  - Centigonal 2y ago
    All of this is true, but it's somewhat offset by the possibility that LLMs may disrupt Google's core revenue stream from search.
  - do_not_redeem 2y ago
    Until you can buy a TPU and stick it in your own server, Google may as well be just another commodotized provider on OpenRouter.
    - yabones 2y ago
      They're more or less dev boards, but they absolutely do sell TPU modules that you can stick right into a M.2 or mini PCIe slot. https://coral.ai/products/ https://coral.ai/products/
      - do_not_redeem 2y ago
        I have to say these seem like hobbyist-level products. For example https://coral.ai/products/m2-accelerator-dual-edgetpu https://coral.ai/products/m2-accelerator-dual-edgetpu can do 8 TOPS, but a 5-year-old RTX 2060 gets you 50 TOPS. A newer H100 gets you 3958 TOPS. Nobody's going to buy 500 of those chips and stick them in 500 M.2 slots to match the performance of a single H100. Do they make any better chips that I missed?
        margalabargala 2y ago
        I would call them less hobbyist products, and more compute for IOT/edge devices. They aren't made for a datacenter and aren't trying to compete with an H100. Yes, it has one sixth the performance of a RTX 2060, but it has one-five-hundredth the volume. For a specific siloed application, 8 TOPS is plenty. Think image processing, etc. There are plenty of production use cases where that makes sense and an H100 does not.
- georgeecollins 2y ago
  Obviously you can't keep that margin forever, but the counter argument would be that NVDA could just sell more chips if they had to accept smaller margins. You could see them making more affordable graphics cards, put more emphasis on AI at the edges, like in mobile devices or computers. And also everybody thinks about robotics as these fancy bipeds. What about sticking visual recognition in a garage door or kitchen appliances. There will be lots of applications if the chips were cheap. The stock is overpriced but I think the company will be OK.
ghaff 2y ago
You see different versions of the four horsemen of the internet but the one I remember (and I can find lots of references to on the internet) is: Cisco, Sun, EMC, and Oracle. And, indeed, Oracle is the only one continuing to perform whether you like them or not and whether startups use them at this point. With respect to Cisco specifically (and Intel) there was also a huge optical networking bubble.
- moregrist 2y ago
  While Oracle definitely benefited from the dot-com era, my impression was that, unlike the other three, its core business has always been banks and other large enterprise companies. That core didn’t suffer much during the dot-com crash so Oracle was in a good position to do things like vacuum up the pieces of Sun.
  - ghaff 2y ago
    Don't disagree. That was the common metaphor? But Oracle was less embedded in the internet ecosystem even if Sum was enterprise too to a large degree--though was trying to be more startup/internety given their roots.
- segmondy 2y ago
  Linux ate Sun, I ran a sun lab, had a few sun workstations at home, but really preferred my linux/BSD boxes. BSD/Linux ate into Cisco. You could buy multiport ethernet cards, throw it into a linux PC and have your own router/firewall that offered more features than Cisco. MySQL would have eaten into Oracle, but their stupid MyISAM got in the way.
  - DrFalkyn 2y ago
    MySQL would never have eaten Oracle. Oracle had /has a huge installed base of corporate/government customers who are risk adverse to switching out their database for fear of breaking critical systems. No one building a business today would ever choose Oracle, but their hold on legacy customers is pretty strong. They will probably die a slow death as their customer base dwindles if they can’t pivot. They are fairly similar to IBM
phyzix5761 2y ago
I don’t know any investor who puts 100% of their money into a single stock, nor any who lack recurring cash flow to buy more of what they already own. While their 2000 purchase may not have realized any gains, they’re likely ahead thanks to dollar cost averaging and dividend payouts.
- deleted 2y ago
  [deleted]
- duskwuff 2y ago
  > I don’t know any investor who puts 100% of their money into a single stock You clearly don't follow very many "meme stock" communities.
  - phyzix5761 2y ago
    Those are categorized as speculators not investors. https://www.investopedia.com/ask/answers/09/difference-between-investing-speculating.asp https://www.investopedia.com/ask/answers/09/difference-betwe...
    - wat10000 2y ago
      "No true Scotsman" strikes again.
    - poincaredisk 2y ago
      I'm not saying you're wrong, but on this case isn't this a tautology? Since investing 100% in a single stock makes one a speculator, not investor, then by definition no investor invests 100% in a single stock.
      - phyzix5761 2y ago
        The key difference between a speculator and an investor lies in their financial goals, not the number of stocks they hold. A speculator seeks short-term profits, often through high-risk trades, while an investor focuses on building long-term wealth through, steady, strategic investments.
jeffbee 2y ago
You can pick better examples. I would go with JDSU.
nolamark 2y ago
but a great bet as the bubble was bursting was not mining equipment for the prospectors, but instead energy drinks for the coders. Specifically $1000 invested in Monster Beverage Corporation (MNST) would be worth $1,187,849 today. same $1000 invest peak dot com on March 10, 2000 Apple (AAPL): Value today : $266,862. Nvidia (NVDA): Value today : $882,065. Amazon (AMZN): Value today : $256,482.
- Horffupolde 2y ago
  Picking stocks retroactively is easy.
  - jackcosgrove 2y ago
    Investing in a market index today is even easier. Instead of doing historical research on thousands of stocks, you just compare the expense ratios of a handful of index funds and pick the lowest one.
    - ghaff 2y ago
      I don't disagree but even modest bets in specific companies have done pretty well over the past couple decades or so. Yes, they're gambles but small-ish bets for bigger payoffs than NASDAQ. (Though that's been pretty good overall and probably safer in aggregate.)
      - frontfor 2y ago
        It’s hard to know few decades ago which companies to put substantial money in. It’s hard to know which companies will perform in the next few decades. And if you are wrong in your bets, there goes a few decades of your life and you can’t rewind the clock to try again.
        Retric 2y ago
        If you’re retirement investing there’s there’s no need to make substantial bets in individual companies. 90% in index funds will get you to a reasonable retirement, 10% in something that looks interesting has minimal downside and significant upside because the value of money is non linear. Assuming a buy and hold strategy at worst all your bet goes to zero which is unlikely, but there’s many companies that go to 100+X and hitting them can meaningfully boost your retirement. Gateway computers vs Dell wasn’t an obvious choice, but that’s a coin flip with huge upsides. Buy it in a given year and ignore it for the next 20, no you’re not going to time the market but you would see most of the upside.
underlipton 2y ago
>once the euphoria had worn off the market consensus was that the stock just wasn’t worth as much as the price it had been selling for at the height of the mania. I've seen too much in the past 4 years to think that euphoria is anything but a convenient and incomplete explanation for things like, "Cisco's price hit its high 25 years ago and never since." More is happening, driven by the fact that there's more ways to make money on the movement of a stock than it going up significantly in price over time.
wmf 2y ago
The difference between Cisco and Nvidia is that Cisco's P/E ratio exploded out of proportion to their business while Nividia's revenue and profit are increasing exponentially. But people will probably tank NVDA -95% anyway because "bubble popped".
- diamond559 2y ago
  There is certainly a boom for Nvidia right now. To justify their PE though Nvidia has to keep increasing their already massive revenue to completely ridiculous and unsustainable levels. The bubble here is the amount that big tech is spending on unprofitable "AI" simply to keep their stock prices from collapsing.
  - aurareturn 2y ago
    Nvidia's forward P/E is only 27.10. Is their valuation really that outrageous? Netflix has a P/E of 46 right now.
    - diamond559 2y ago
      "AI" is unprofitable and almost completely useless. With capex demands ever increasing just to push the diminishing scaling returns further, this is not sustainable. Their revenue will collapse in the upcoming recession and you'll see it's PE balloon into the hundreds.
      - aurareturn 2y ago
        AI is in the very early stage of an industry where competition is intense, therefore, profits are harder to come by. Eventually, AI will be immensely profitable. Calling LLMs useless is just as nuts.
        acdha 2y ago
        AI becoming useful doesn’t mean that it will become immensely profitable: the lesson of DeepSeek was that nobody has a moat.
JumpCrisscross 2y ago
> Any parallels to hot contemporary stocks are left as an exercise for the reader — and I do not mean to suggest that history must always repeat exactly Crashes come amidst collapsing expectations. The structural risk tech currently faces is a collapse of American tech companies' global TAMs due to trade policy. (Think: the market constriction Tesla is seeing in Europe, but across more companies and markets.)
weatherlite 2y ago
"At the March 2000 peak, Cisco's price-to-earnings ratio stood at 201 times," So that's about 10x more than Google and 8x more than Meta and 5.7x more than Amazon. Just to get some proportion.
canterburry 2y ago
Ironically, if you look at Sysco's stock price during the dotcom days, it's often correlated with Cisco spikes because clueless traders would accidentally buy the food logistics company stock instead of Cisco.
- fifilura 2y ago
  I guess just because a lot trades were initiated over phone?
- BitwiseFool 2y ago
  I guess it's time to start a company called mVidia.
  - pavlov 2y ago
    I think the usual move is to buy some barely operating New Jersey deli chain or teabag factory that happens to be publicly listed, then rename it to: Mvidia.AI BlockChain Deep Technology, Inc. ...and start putting out press releases about how you're planning to 1000x your revenue and uplist to NASDAQ, etc.
    - BitwiseFool 2y ago
      Be sure to sell chips and biscuits - but always refer to the biscuits as wafers. Then describe adding toppings to them as wafer-scale integration.
      - SahAssar 2y ago
        "3d-stacked intelligent layout of secured sticky elements for increased stability and on-demand integration"
    - kindatrue 2y ago
      Deep cut of "Long Island Iced Tea Corp" -> "Long Blockchain Corp" https://en.wikipedia.org/wiki/Long_Blockchain_Corp https://en.wikipedia.org/wiki/Long_Blockchain_Corp.
ohmygoodniche 2y ago
So when the llm bubble burst everyone holding Nvidia will probably lose? Makes sense to me.
FollowingTheDao 2y ago
I worked at Cisco from 94-99 in the Morrisville, NC center. The salespeople there did not even have to really work and they were making bank. And so was I. Until my mental health collapsed and was "mutually terminated. Soon after I left I decided to sell all my Cisco stock and it was just in time, 2/10/2000. I wish I could say I did it because I was smart but I was just tired of the whole scene. But what is happening now, IMHO, is way worse, and much different, than the dot com bust. The Yemen offensive might be a pre-text for, or start, a war with Iran.
- myth_drannon 2y ago
  US always bombed countries in middle-east/africa, that's nothing new and it didn't impact the world order/economy significantly. On the other hand if US invades Canada... that's WW3.
  - FollowingTheDao 2y ago
    We are not in the same timeline. Just out today: Oil rises as Trump says Iran will be held responsible for any future Houthi attacks https://www.cnbc.com/2025/03/17/oil-rises-as-trump-says-iran-will-be-held-responsible-for-any-future-houthi-attacks.html https://www.cnbc.com/2025/03/17/oil-rises-as-trump-says-iran... “Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN,” Trump said in a post on social media platform Truth Social. “IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!”
- SpicyLemonZest 2y ago
  The US has been continually bombing Yemen for 23 years, just as it continuously bombed Iraq for 10 years throughout the dot-com bubble. I don't think it's a good idea but it's not a new one.
  - FollowingTheDao 2y ago
    New President though, yeah?
ben7799 2y ago
Part of this was that sales for networking gear actually did tank because there were so many companies going under all at once that suddenly weren't buying any more gear. There were so many companies going under lots of people I knew ended up with racks in their house with servers from work that they got for free. I never did that but I had free furniture!
boringg 2y ago
The tech boom was really about infra back in the day which is why Cisco et al hardware providers did incredibly well until they didn't. It's already been talked about that the current iteration of deep infra spend could very much be a loss as an investment but might live on in other ways in the future. The counter argument is that any serious hyper scaler has to spend to be at the table if they believe their own marketing spiel about growth and opportunity.
lizknope 2y ago
I had friends that worked at a startup that Cisco acquired. They have options to buy at around $30. So they bought the shares and watched the stock hit $79 but didn't sell. Then the stock dropped to $20 and even though they didn't sell the stock they had to pay taxes because of how the AMT (Alternative Minimum Tax) worked at the time. Even if they sold all the stock they had they couldn't cover the tax bill. Along with the option back dating scandals I think this is one of the reasons all the companies I have worked at since give out RSUs and sell 40% when they vest to pay your estimated tax bill.
- fragmede 2y ago
  Thats because you're getting in late. Startups still issue options - ISOs and NSOs to early employees, with different tax treatment.
  - lizknope 2y ago
    You are right. I've worked at 2 startups and we had options and filed Section 83(b) elections and pre bought our stock for $0.001 a share. But both companies failed so I lost about $50 I had options at the 2 companies in 2002 and 2005 but since then the 4 other large publicly traded companies have only given RSUs
throwaway984393 2y ago
The stock may have suffered but Cisco as a company has been consistently profitable and dependable partly due to its financial management. They have a crap ton of cash, and they are very good at buying and integrating companies. I would consider them more reliable than IBM, partly because they do make "real things", and partly because they're just damn good at business. They are a great example of why you don't need an engineer to lead a very successful engineering company.
rsynnott 2y ago
Sun is another one. Really I’m not sure that any of the major “selling shovels in a gold rush” companies came out of it _particularly_ well.
detourdog 2y ago
Cisco grew through acquisitions. The only example I can think of is Ascend. They made great products for connecting small offices and homes to digital lines. One thing I never saw discussed is the dotcom bubble was inflated by the price premium investors paid for buying Ascend stock. Cisco than paid a premium to those shareholders to buy Ascend and than finally the premium paid for the future earnings of Cisco. I see that as triple counting future earnings.
bustling-noose 2y ago
>though nowadays they have more competition in that area This is what is called lack of moat. If today, every router beyond 1Gig was made by Cisco then the moat would be so wide that the internet would literally not exist without it. The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat. Cisco didnt have a wide moat. Nvidia currently does, but it may go away sooner than later as they don't really have any special sauce to their graphics cards as such. Same goes with OpenAI, or Qualcomm (Apple made a modem now) or any other tech company with an illusion of a wide moat. Tech businesses only have a wide moat until someone decides to compete seriously and that can usually be done with a lot of money in a relatively short time. Some of the businesses like Walmart and Cosco for example have a really wide moat in the sense that their business is not something that someone with just money can beat in a few years. Look how amazon setup physical stores with money and failed. It's extremely difficult to setup that kind of business. Trust from suppliers and consumers takes decades in those kinds of businesses. If your business is relying on a moat that someone can beat with R&D and money in a few years, then you don't really have a moat.
- flipthefrog 2y ago
  Funny how usage of the the word moat simply exploded here on HN a few weeks ago.
  - stickfigure 2y ago
    This word has been part of the core vernacular of HN for as long as I can remember.
    - ToValueFunfetti 2y ago
      Looks like a real effect: https://hntrends.net/compare/words?words=moat,castle,roi https://hntrends.net/compare/words?words=moat,castle,roi
      - stickfigure 2y ago
georgeecollins 2y ago
Or another way to think about that is: price matters. In this era of meme stocks people think maybe it doesn't. But Cisco, MSFT and some others had good businesses but were terrible investments for at least decade or more because any potential growth was baked into the price. You could say that about a lot of stocks today, probably NVDA, APPL (disclosure I have both). They aren't bad businesses but they are bad investments.
01100011 2y ago
The difference with, say, NVDA, is that moving bits was more or less a solved problem in 2000. That's not to say NVDA can't go down like Cisco, but it's not really the same story(yet). AI architectures are still in flux and it's a far more complex problem vs networking. Edit: and sure, matrix math is more or less solved, but that's not all that goes into a "ai" accelerator. SW, libraries, tools, support, HW efficiency and availability, etc...
shadowgovt 2y ago
There is a meta-problem: one that I don't have a solution for, but keeps coming up. We are in an era where there is simply more capital to invest than ever before. Countries that were historically "third world" have developed into their own capital sources, with more resources than ever looking for investment. The NPR show Planet Money called this "The Giant Pool of Money" in their reporting on the housing bubble, and they tracked how it acted as an accelerant to push the housing market into subprime mortgages and eventual collapse, but the underlying cause is the same: where the bubbles are the sauce, the money is the stove. So why does the money keep creating bubbles instead of giving a sort of, if you will, "even heat?" * There's more of it than there are safe investments with guaranteed low-yield returns * A lot of it is sovereign wealth, so it must be invested: at a certain level, that money loses value if it just sits in a treasury (it's also the case that at a certain scale, investment becomes security; keeping all your money in a sack jeopardizes everything if the sack gets stolen, and there are analogies for this that operate at the scale of major corporations and nation states). * When the investments are less safe, the money chases itself: a fund manager can get fired if they invest in cars when everyone else is investing in dotcoms and the cars don't grow as fast. It's safer for individual actors to stick with the crowd, so as a result, the crowd comes in and pumps huge amounts of resources into one sector until that sector fails to perform and the money evaporates. It is a problem with no obvious solution. Hypothetically, Norway may be on the right track: they maintain a diverse portfolio with a lot of long-term bets (sustainable energy) and reinvestment bets (domestic housing and development).
xucheng 2y ago
At least, Cisco survived. Nortel and Lucent were not so lucky.
subsubzero 2y ago
Also during that heyday Cisco planned a sprawling south bay campus that was going to cost a fortune and house tens of thousands of new employees.(I lived between cisco's HQ and the proposed new campus during that time. The dotcom bubble burst and the campus never saw the light of day. A similar more recent parallel is Google's San Jose village, it was going to be constructed in 2020 and after and also house thousands of google employees along with mixed use commercial, I lived in Willow Glen at the time and people were buzzing around this new campus and all the new economic activity it would provide. In the back of my mind I remember Cisco's endeavor and felt like this new village would meet a similar fate of implosion. And sure enough the pandemic hit and the village project hit the breaks, most likely never to return. Having big office projects in San Jose with the leading market tech companies is something akin to invading Russia, you always fail. /s

smallmancontrov 2y ago

Obviously you don't mean NVIDIA, because 80% margins on matrix multiplication will last foreverrrrr.

dehrmann 2y ago
And I can't name several customers with very deep pockets working on their own chips to squeeze/compete with NVDA.
- alephnerd 2y ago
  > And I can't name several customers with very deep pockets working on their own chips to squeeze/compete with NVDA. Google, Amazon, and Microsoft all have custom ASIC and TPU projects in their pipeline, and what holds true today might not hold true in 5 years. A major reason Nvidia was able to do so well was because of technical outreach by donating their GPUs to programs all over the US, building a strong albeit self serving OSS relationship, the CUDA ecosystem, and the acquisition of Infiniband. Much of these advantages can be nullified by competitive margins and pricing for hyperscalers designed and owned hardware. Cisco was hit by this same situation as server vendors like Dell began integrating their own in-house networking functionality within their servers, and Dell itself was outcompeted by cloud vendors.
  - smallmancontrov 2y ago
    Agreed, the only thing I'd add would be AMD's self-sabotage. Pretending to have compute capability (see also "right around the corner") for over a decade when it was actually so broken as to be sub-viable was an enormous own-goal that they doubled down on when they exited desperation mode without rehydrating the teams and tripled down on with the RDNA/CDNA split. By rights they should have been fast followers, but they stacked the critical mistakes so high that frankly I think NVIDIA's subsidized GPGPU classes are the smaller part of this story. If the people struggling to get OpenCL to work had been able to get it to work (on other than NVIDIA GPUs lol) the situation would look very different today.
  - JKCalhoun 2y ago
    And I'd be surprised (disappointed) if AAPL were sitting on their hands.
- roenxi 2y ago
  I think you're not naming entire nation states, given the way the Chinese are splashing money around there it looks like there is about to be a flood of chipmaking capacity hitting the market and a lot of that will end up competing in matrix multiplying. Although I hear VCs are working on an algorithm where they burn money directly and the smoke patterns represent the solution to the multiplication. That might keep the margins high.
  - smallmancontrov 2y ago
    Those Chinese companies will have to fight our western champions, TSMC in a green trenchcoat, TSMC in a red trenchcoat, TSMC in a blue trenchcoat, TSMC in a purple trenchcoat, and TSMC in a yellow trenchcoat.
    - selimthegrim 2y ago
      Is this after the same Spidermen TSMCs got down from all sitting on top of each other?
  - randmeerkat 2y ago
    > Although I hear VCs are working on an algorithm where they burn money directly and the smoke patterns represent the solution to the multiplication. That might keep the margins high. This has been bothering me for some time now. It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t… Do VCs really have no standard for due diligence, do they really just not care, or is there something else at play that I’m missing…?
    - paxys 2y ago
      > It’s rather obvious to me, as an engineer, which startups are well positioned and which aren’t So I assume you are a multi-billionaire, right?
      - kasey_junk 2y ago
        You could know precisely what to invest in but not have access to the funds or deal flow and not be successful.
- diamond559 2y ago
  Microsoft, Meta and Oracle already spend billions on supposedly completely inferior(according to the Nvidia cultists) AMD chips. Nvidia is the biggest bubble in human history.
  - 8ytecoder 2y ago
    That’s got to be Tesla. Nvidia’s PE is still half that of Tesla.
    - schmidtleonard 2y ago
      PE isn't a cheat code to rational stock valuation, it's the "nothing ever changes" assumption dressed up in a formula. PE looks at past earnings, while the price of a stock buys its future earnings. A modest PE on NVDA says "I expect datacenter revenue to continue" while a modest PE on TSLA would say "I expect robotaxi to fail." These are fair opinions to have, as are their opposites, but if datacenter revenue collapses then today's modest PE won't save NVDA and if TSLA can pull off robotaxi then today's high PE will be vindicated. Stocks are all about Future Earnings, but you can't put that in a column and sort by it so we have PE. You can certainly have success while avoiding high PE stocks, but you are on a site about startups and your name suggests you work in the tech sector, which are both places where high PE often does make sense and it pays to be familiar with the reasons.
      - marcosdumay 2y ago
        > a modest PE on TSLA would say "I expect robotaxi to fail." No. Just having competition is enough to destroy the expectations on TSLA. And realistically, they are abut last on that race, being thrown out of track about a decade ago and never managing to make anything work since then. So, yeah, betting on no competition is a very weird option.
        JKCalhoun 2y ago
        Good point. With BMW, Lexus, Audi, Mercedes, Porsche — all with luxury EV's — Tesla really is looking like an also-ran. I'm not in that circle of clientele though so I don't know: are any of these now seen as the luxury electric car?
doctorpangloss 2y ago
People choose NVIDIA because of the software. So will software margins go away?
- JKCalhoun 2y ago
  Just an interested layman here: seems like it's the libraries that people choose. I don't see why those can't be ported to other hardware.
  - duped 2y ago
    They are ported to new hardware, it's just that new hardware is made by NVidia. Part of why their moat is so deep is that they are able to keep the software stack stable with transparent hardware architecture upgrades. It's kind of the opposite of intel.
deleted 2y ago
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slowtrek 2y ago
Cisco did not innovate out of their first incarnation. Nvidia evolved out of gaming gpus, and they didn't do it because they were looking for trends.
- oldpersonintx 2y ago
  [dead]
- csomar 2y ago
  Nvidia didn't innovate into AI. Developers used their gaming cards for AI. They kinda got into that situation by pure luck. I wouldn't trust they will be able to pivot into the next big bubble if it's quite outside their area of expertise.
  - est 2y ago
    also crypto mining does tons of SHA256 on CUDA.
    - latchkey 2y ago
      SHA265 hasn't been efficient on a GPU (compared with an ASIC) in over 10 years.
      - akimbostrawman 2y ago
        crpto != only Bitcoin. Any cryptocurrency worth its salt is ASCI resistant.
        latchkey 2y ago
        Even ethash had ASICs. As long as there is enough financial incentive, there can always be ASICs built for cheating the system. "Any cryptocurrency worth its salt" would have that incentive.
  - theshackleford 2y ago
aurareturn 2y ago
Obviously you don't mean NVIDIA, because 80% margins on matrix multiplication will last foreverrrrr. It won't last forever. The question will always be: Are we in the 1995 or the 2000 of the dotcom era? By 1995, Cisco's stock had already increased 6x since the start of 1993. If you bought at 1995, you'd 10x by its peak. Even after the bust, Cisco's stock was still 50% higher than it was in 1995. The problem with Nvidia's stock isn't demand. The problem is that Nvidia makes something so good and so valuable that the US government has decided to nationalize them by dictating who they can or can't sell to. If Nvidia is freely able to sell to any country they want, their sales and margins would be much higher right now. The demand is that great.
- diamond559 2y ago
  "AI" isn't even profitable, it is neither good nor valuable outside of for creating a massive asset bubble. The export ban was made by old dinosaurs that don't understand the tech and is more about China than "AI".
  - immibis 2y ago
    LLMs (what you mean by "AI" with the scare quotes) are great at spamming and scamming people.
    - acdha 2y ago
      I’d generalize that somewhat to say that LLMs are good where you can cheaply verify the results relative to the cost of being wrong. A lot of scamming is already structured around most people ignoring their messages, and they don’t support anything so it’s just a question of whether they lose more potential marks than doing it manually. (This is also why coding is one of the areas where they perform best: the cost of structural validation is low and there’s a human in the loop verifying the behavior)
      - aaronbaugher 2y ago
        I've tinkered with LLMs, because I keep thinking it'd be cool to have an "assistant" that could research and boil down information for me. The problem is coming up with a question that is A) too complicated to be answered in a single web search that I can do myself as fast as asking the question, and B) not too complicated or important for me to accept the answer without redoing the research myself to verify the answers are correct. For simple questions (How long does the moon take to orbit the earth), a search engine will give the answer right in the results; I don't even have to click through to a page. An LLM can't save me any time there, so I'd only be using it to be using "AI" (which is what I see people around me doing). For difficult or currently controversial questions (What's the best hosting service for my new subscription site, taking into account price, reliability, location, and hardware support?) there's no way I could trust it not to be making shit up. By the time I checked all its work, I might as well have done it myself. So I'd like to usefully use it, but I can't figure out how to use it as more than a curious toy.
Workaccount2 2y ago
I'm continually impressed how Google manages to be left out of LLM discussions. I don't know what it is but it always seems like people forget about Google in this space. Google has both cutting edge SOTA AI models and has it's own in-house ai acceleration hardware that is approximately on par with Nvidia. It's why their models are dirt cheap to use and have enormous context.
- Centigonal 2y ago
  All of this is true, but it's somewhat offset by the possibility that LLMs may disrupt Google's core revenue stream from search.
- do_not_redeem 2y ago
  Until you can buy a TPU and stick it in your own server, Google may as well be just another commodotized provider on OpenRouter.
  - yabones 2y ago
    They're more or less dev boards, but they absolutely do sell TPU modules that you can stick right into a M.2 or mini PCIe slot. https://coral.ai/products/ https://coral.ai/products/
    - do_not_redeem 2y ago
      I have to say these seem like hobbyist-level products. For example https://coral.ai/products/m2-accelerator-dual-edgetpu https://coral.ai/products/m2-accelerator-dual-edgetpu can do 8 TOPS, but a 5-year-old RTX 2060 gets you 50 TOPS. A newer H100 gets you 3958 TOPS. Nobody's going to buy 500 of those chips and stick them in 500 M.2 slots to match the performance of a single H100. Do they make any better chips that I missed?
      - margalabargala 2y ago
        I would call them less hobbyist products, and more compute for IOT/edge devices. They aren't made for a datacenter and aren't trying to compete with an H100. Yes, it has one sixth the performance of a RTX 2060, but it has one-five-hundredth the volume. For a specific siloed application, 8 TOPS is plenty. Think image processing, etc. There are plenty of production use cases where that makes sense and an H100 does not.
georgeecollins 2y ago
Obviously you can't keep that margin forever, but the counter argument would be that NVDA could just sell more chips if they had to accept smaller margins. You could see them making more affordable graphics cards, put more emphasis on AI at the edges, like in mobile devices or computers. And also everybody thinks about robotics as these fancy bipeds. What about sticking visual recognition in a garage door or kitchen appliances. There will be lots of applications if the chips were cheap. The stock is overpriced but I think the company will be OK.

ghaff 2y ago

You see different versions of the four horsemen of the internet but the one I remember (and I can find lots of references to on the internet) is: Cisco, Sun, EMC, and Oracle. And, indeed, Oracle is the only one continuing to perform whether you like them or not and whether startups use them at this point. With respect to Cisco specifically (and Intel) there was also a huge optical networking bubble.

moregrist 2y ago
While Oracle definitely benefited from the dot-com era, my impression was that, unlike the other three, its core business has always been banks and other large enterprise companies. That core didn’t suffer much during the dot-com crash so Oracle was in a good position to do things like vacuum up the pieces of Sun.
- ghaff 2y ago
  Don't disagree. That was the common metaphor? But Oracle was less embedded in the internet ecosystem even if Sum was enterprise too to a large degree--though was trying to be more startup/internety given their roots.
segmondy 2y ago
Linux ate Sun, I ran a sun lab, had a few sun workstations at home, but really preferred my linux/BSD boxes. BSD/Linux ate into Cisco. You could buy multiport ethernet cards, throw it into a linux PC and have your own router/firewall that offered more features than Cisco. MySQL would have eaten into Oracle, but their stupid MyISAM got in the way.
- DrFalkyn 2y ago
  MySQL would never have eaten Oracle. Oracle had /has a huge installed base of corporate/government customers who are risk adverse to switching out their database for fear of breaking critical systems. No one building a business today would ever choose Oracle, but their hold on legacy customers is pretty strong. They will probably die a slow death as their customer base dwindles if they can’t pivot. They are fairly similar to IBM

phyzix5761 2y ago

I don’t know any investor who puts 100% of their money into a single stock, nor any who lack recurring cash flow to buy more of what they already own. While their 2000 purchase may not have realized any gains, they’re likely ahead thanks to dollar cost averaging and dividend payouts.

deleted 2y ago
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duskwuff 2y ago
> I don’t know any investor who puts 100% of their money into a single stock You clearly don't follow very many "meme stock" communities.
- phyzix5761 2y ago
  Those are categorized as speculators not investors. https://www.investopedia.com/ask/answers/09/difference-between-investing-speculating.asp https://www.investopedia.com/ask/answers/09/difference-betwe...
  - wat10000 2y ago
    "No true Scotsman" strikes again.
  - poincaredisk 2y ago
    I'm not saying you're wrong, but on this case isn't this a tautology? Since investing 100% in a single stock makes one a speculator, not investor, then by definition no investor invests 100% in a single stock.
    - phyzix5761 2y ago
      The key difference between a speculator and an investor lies in their financial goals, not the number of stocks they hold. A speculator seeks short-term profits, often through high-risk trades, while an investor focuses on building long-term wealth through, steady, strategic investments.

jeffbee 2y ago

You can pick better examples. I would go with JDSU.

nolamark 2y ago

but a great bet as the bubble was bursting was not mining equipment for the prospectors, but instead energy drinks for the coders. Specifically $1000 invested in Monster Beverage Corporation (MNST) would be worth $1,187,849 today. same $1000 invest peak dot com on March 10, 2000 Apple (AAPL): Value today : $266,862. Nvidia (NVDA): Value today : $882,065. Amazon (AMZN): Value today : $256,482.

Horffupolde 2y ago
Picking stocks retroactively is easy.
- jackcosgrove 2y ago
  Investing in a market index today is even easier. Instead of doing historical research on thousands of stocks, you just compare the expense ratios of a handful of index funds and pick the lowest one.
  - ghaff 2y ago
    I don't disagree but even modest bets in specific companies have done pretty well over the past couple decades or so. Yes, they're gambles but small-ish bets for bigger payoffs than NASDAQ. (Though that's been pretty good overall and probably safer in aggregate.)
    - frontfor 2y ago
      It’s hard to know few decades ago which companies to put substantial money in. It’s hard to know which companies will perform in the next few decades. And if you are wrong in your bets, there goes a few decades of your life and you can’t rewind the clock to try again.
      - Retric 2y ago
        If you’re retirement investing there’s there’s no need to make substantial bets in individual companies. 90% in index funds will get you to a reasonable retirement, 10% in something that looks interesting has minimal downside and significant upside because the value of money is non linear. Assuming a buy and hold strategy at worst all your bet goes to zero which is unlikely, but there’s many companies that go to 100+X and hitting them can meaningfully boost your retirement. Gateway computers vs Dell wasn’t an obvious choice, but that’s a coin flip with huge upsides. Buy it in a given year and ignore it for the next 20, no you’re not going to time the market but you would see most of the upside.

underlipton 2y ago

>once the euphoria had worn off the market consensus was that the stock just wasn’t worth as much as the price it had been selling for at the height of the mania. I've seen too much in the past 4 years to think that euphoria is anything but a convenient and incomplete explanation for things like, "Cisco's price hit its high 25 years ago and never since." More is happening, driven by the fact that there's more ways to make money on the movement of a stock than it going up significantly in price over time.

wmf 2y ago

The difference between Cisco and Nvidia is that Cisco's P/E ratio exploded out of proportion to their business while Nividia's revenue and profit are increasing exponentially. But people will probably tank NVDA -95% anyway because "bubble popped".

diamond559 2y ago
There is certainly a boom for Nvidia right now. To justify their PE though Nvidia has to keep increasing their already massive revenue to completely ridiculous and unsustainable levels. The bubble here is the amount that big tech is spending on unprofitable "AI" simply to keep their stock prices from collapsing.
- aurareturn 2y ago
  Nvidia's forward P/E is only 27.10. Is their valuation really that outrageous? Netflix has a P/E of 46 right now.
  - diamond559 2y ago
    "AI" is unprofitable and almost completely useless. With capex demands ever increasing just to push the diminishing scaling returns further, this is not sustainable. Their revenue will collapse in the upcoming recession and you'll see it's PE balloon into the hundreds.
    - aurareturn 2y ago
      AI is in the very early stage of an industry where competition is intense, therefore, profits are harder to come by. Eventually, AI will be immensely profitable. Calling LLMs useless is just as nuts.
      - acdha 2y ago
        AI becoming useful doesn’t mean that it will become immensely profitable: the lesson of DeepSeek was that nobody has a moat.

JumpCrisscross 2y ago

> Any parallels to hot contemporary stocks are left as an exercise for the reader — and I do not mean to suggest that history must always repeat exactly Crashes come amidst collapsing expectations. The structural risk tech currently faces is a collapse of American tech companies' global TAMs due to trade policy. (Think: the market constriction Tesla is seeing in Europe, but across more companies and markets.)

weatherlite 2y ago

"At the March 2000 peak, Cisco's price-to-earnings ratio stood at 201 times," So that's about 10x more than Google and 8x more than Meta and 5.7x more than Amazon. Just to get some proportion.

canterburry 2y ago

Ironically, if you look at Sysco's stock price during the dotcom days, it's often correlated with Cisco spikes because clueless traders would accidentally buy the food logistics company stock instead of Cisco.

fifilura 2y ago
I guess just because a lot trades were initiated over phone?
BitwiseFool 2y ago
I guess it's time to start a company called mVidia.
- pavlov 2y ago
  I think the usual move is to buy some barely operating New Jersey deli chain or teabag factory that happens to be publicly listed, then rename it to: Mvidia.AI BlockChain Deep Technology, Inc. ...and start putting out press releases about how you're planning to 1000x your revenue and uplist to NASDAQ, etc.
  - BitwiseFool 2y ago
    Be sure to sell chips and biscuits - but always refer to the biscuits as wafers. Then describe adding toppings to them as wafer-scale integration.
    - SahAssar 2y ago
      "3d-stacked intelligent layout of secured sticky elements for increased stability and on-demand integration"
  - kindatrue 2y ago
    Deep cut of "Long Island Iced Tea Corp" -> "Long Blockchain Corp" https://en.wikipedia.org/wiki/Long_Blockchain_Corp https://en.wikipedia.org/wiki/Long_Blockchain_Corp.

ohmygoodniche 2y ago

So when the llm bubble burst everyone holding Nvidia will probably lose? Makes sense to me.

FollowingTheDao 2y ago

I worked at Cisco from 94-99 in the Morrisville, NC center. The salespeople there did not even have to really work and they were making bank. And so was I. Until my mental health collapsed and was "mutually terminated. Soon after I left I decided to sell all my Cisco stock and it was just in time, 2/10/2000. I wish I could say I did it because I was smart but I was just tired of the whole scene. But what is happening now, IMHO, is way worse, and much different, than the dot com bust. The Yemen offensive might be a pre-text for, or start, a war with Iran.

myth_drannon 2y ago
US always bombed countries in middle-east/africa, that's nothing new and it didn't impact the world order/economy significantly. On the other hand if US invades Canada... that's WW3.
- FollowingTheDao 2y ago
  We are not in the same timeline. Just out today: Oil rises as Trump says Iran will be held responsible for any future Houthi attacks https://www.cnbc.com/2025/03/17/oil-rises-as-trump-says-iran-will-be-held-responsible-for-any-future-houthi-attacks.html https://www.cnbc.com/2025/03/17/oil-rises-as-trump-says-iran... “Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN,” Trump said in a post on social media platform Truth Social. “IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!”
SpicyLemonZest 2y ago
The US has been continually bombing Yemen for 23 years, just as it continuously bombed Iraq for 10 years throughout the dot-com bubble. I don't think it's a good idea but it's not a new one.
- FollowingTheDao 2y ago
  New President though, yeah?

ben7799 2y ago

Part of this was that sales for networking gear actually did tank because there were so many companies going under all at once that suddenly weren't buying any more gear. There were so many companies going under lots of people I knew ended up with racks in their house with servers from work that they got for free. I never did that but I had free furniture!

boringg 2y ago

The tech boom was really about infra back in the day which is why Cisco et al hardware providers did incredibly well until they didn't. It's already been talked about that the current iteration of deep infra spend could very much be a loss as an investment but might live on in other ways in the future. The counter argument is that any serious hyper scaler has to spend to be at the table if they believe their own marketing spiel about growth and opportunity.

lizknope 2y ago

I had friends that worked at a startup that Cisco acquired. They have options to buy at around $30. So they bought the shares and watched the stock hit $79 but didn't sell. Then the stock dropped to $20 and even though they didn't sell the stock they had to pay taxes because of how the AMT (Alternative Minimum Tax) worked at the time. Even if they sold all the stock they had they couldn't cover the tax bill. Along with the option back dating scandals I think this is one of the reasons all the companies I have worked at since give out RSUs and sell 40% when they vest to pay your estimated tax bill.

fragmede 2y ago
Thats because you're getting in late. Startups still issue options - ISOs and NSOs to early employees, with different tax treatment.
- lizknope 2y ago
  You are right. I've worked at 2 startups and we had options and filed Section 83(b) elections and pre bought our stock for $0.001 a share. But both companies failed so I lost about $50 I had options at the 2 companies in 2002 and 2005 but since then the 4 other large publicly traded companies have only given RSUs

throwaway984393 2y ago

The stock may have suffered but Cisco as a company has been consistently profitable and dependable partly due to its financial management. They have a crap ton of cash, and they are very good at buying and integrating companies. I would consider them more reliable than IBM, partly because they do make "real things", and partly because they're just damn good at business. They are a great example of why you don't need an engineer to lead a very successful engineering company.

rsynnott 2y ago

Sun is another one. Really I’m not sure that any of the major “selling shovels in a gold rush” companies came out of it _particularly_ well.

detourdog 2y ago

Cisco grew through acquisitions. The only example I can think of is Ascend. They made great products for connecting small offices and homes to digital lines. One thing I never saw discussed is the dotcom bubble was inflated by the price premium investors paid for buying Ascend stock. Cisco than paid a premium to those shareholders to buy Ascend and than finally the premium paid for the future earnings of Cisco. I see that as triple counting future earnings.

bustling-noose 2y ago

>though nowadays they have more competition in that area This is what is called lack of moat. If today, every router beyond 1Gig was made by Cisco then the moat would be so wide that the internet would literally not exist without it. The three things that any value investor values in stocks - Great management, good reinvestment of capital and a really wide moat. Cisco didnt have a wide moat. Nvidia currently does, but it may go away sooner than later as they don't really have any special sauce to their graphics cards as such. Same goes with OpenAI, or Qualcomm (Apple made a modem now) or any other tech company with an illusion of a wide moat. Tech businesses only have a wide moat until someone decides to compete seriously and that can usually be done with a lot of money in a relatively short time. Some of the businesses like Walmart and Cosco for example have a really wide moat in the sense that their business is not something that someone with just money can beat in a few years. Look how amazon setup physical stores with money and failed. It's extremely difficult to setup that kind of business. Trust from suppliers and consumers takes decades in those kinds of businesses. If your business is relying on a moat that someone can beat with R&D and money in a few years, then you don't really have a moat.

flipthefrog 2y ago
Funny how usage of the the word moat simply exploded here on HN a few weeks ago.
- stickfigure 2y ago
  This word has been part of the core vernacular of HN for as long as I can remember.
  - ToValueFunfetti 2y ago
    Looks like a real effect: https://hntrends.net/compare/words?words=moat,castle,roi https://hntrends.net/compare/words?words=moat,castle,roi
    - stickfigure 2y ago

georgeecollins 2y ago

Or another way to think about that is: price matters. In this era of meme stocks people think maybe it doesn't. But Cisco, MSFT and some others had good businesses but were terrible investments for at least decade or more because any potential growth was baked into the price. You could say that about a lot of stocks today, probably NVDA, APPL (disclosure I have both). They aren't bad businesses but they are bad investments.

01100011 2y ago

The difference with, say, NVDA, is that moving bits was more or less a solved problem in 2000. That's not to say NVDA can't go down like Cisco, but it's not really the same story(yet). AI architectures are still in flux and it's a far more complex problem vs networking. Edit: and sure, matrix math is more or less solved, but that's not all that goes into a "ai" accelerator. SW, libraries, tools, support, HW efficiency and availability, etc...

shadowgovt 2y ago

There is a meta-problem: one that I don't have a solution for, but keeps coming up. We are in an era where there is simply more capital to invest than ever before. Countries that were historically "third world" have developed into their own capital sources, with more resources than ever looking for investment. The NPR show Planet Money called this "The Giant Pool of Money" in their reporting on the housing bubble, and they tracked how it acted as an accelerant to push the housing market into subprime mortgages and eventual collapse, but the underlying cause is the same: where the bubbles are the sauce, the money is the stove. So why does the money keep creating bubbles instead of giving a sort of, if you will, "even heat?" * There's more of it than there are safe investments with guaranteed low-yield returns * A lot of it is sovereign wealth, so it must be invested: at a certain level, that money loses value if it just sits in a treasury (it's also the case that at a certain scale, investment becomes security; keeping all your money in a sack jeopardizes everything if the sack gets stolen, and there are analogies for this that operate at the scale of major corporations and nation states). * When the investments are less safe, the money chases itself: a fund manager can get fired if they invest in cars when everyone else is investing in dotcoms and the cars don't grow as fast. It's safer for individual actors to stick with the crowd, so as a result, the crowd comes in and pumps huge amounts of resources into one sector until that sector fails to perform and the money evaporates. It is a problem with no obvious solution. Hypothetically, Norway may be on the right track: they maintain a diverse portfolio with a lot of long-term bets (sustainable energy) and reinvestment bets (domestic housing and development).

xucheng 2y ago

At least, Cisco survived. Nortel and Lucent were not so lucky.

subsubzero 2y ago

Also during that heyday Cisco planned a sprawling south bay campus that was going to cost a fortune and house tens of thousands of new employees.(I lived between cisco's HQ and the proposed new campus during that time. The dotcom bubble burst and the campus never saw the light of day. A similar more recent parallel is Google's San Jose village, it was going to be constructed in 2020 and after and also house thousands of google employees along with mixed use commercial, I lived in Willow Glen at the time and people were buzzing around this new campus and all the new economic activity it would provide. In the back of my mind I remember Cisco's endeavor and felt like this new village would meet a similar fate of implosion. And sure enough the pandemic hit and the village project hit the breaks, most likely never to return. Having big office projects in San Jose with the leading market tech companies is something akin to invading Russia, you always fail. /s