Nvidia and Cisco - Shovels in a Gold Rush

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The world has the first 5 Trillion $ company, but is it just history repeating itself?

It's a classic "Shovels in a Gold Rush" story.


Year 2000 - Cisco became one of the first company to reach $0.5 Trillion market cap, peaking to $555 Bn - the most valued company at that point.

Nvidia - providing infra for the AI boom.
Cisco - provided infra for the web/dot com boom.

But.....Cisco in 2000 plummeted by 80%, and it's still not back to its 2000 highs.
This isn't fear-mongering, but just a reminder - The real winners after a decade or so, might be very different from what we think them to be.


Quoting Prof. Aswath Damodaran, 

"NVIDIA, to me, reminds me a great deal of Cisco. It is creating the architecture for AI, which is critical, right? And architecture businesses are the ones that monetize these big revolutionary changes the first. 


Cisco started to make money well before Amazon started to make money because you need the architecture there. So, I think NVIDIA has the advantage of being one of the first companies that will monetize AI and be able to show profits and growth, and it already is. But the architecture part of a revolutionary change business is never going to be 50%, 30%, or even 20% of the business. 


I mean, Cisco, once everything got played out, was not 50% of the internet, right? Because when you get the networking equipment, the other businesses have to grow.


So even if you believe the Goldman Sachs numbers for AI being a $3 trillion business or a $4 trillion business, the architecture for AI, which is what NVIDIA provides, can’t be more than a half a trillion of that. And that’s actually larger than any of the predictions I’ve seen for how high the AI chip business has going."


(If you’re following the AI wave, the professor’s insights are an absolute must-watch.)

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