Cisco Shares Surge Amid AI Demand, Tariff Uncertainty

Cisco Systems (CSCO) shares rose 6.4% in premarket trading on Thursday, driven by robust demand for its cloud networking gear and robust AI infrastructure orders. Despite macro uncertainty, including President Donald Trump's tariffs, the company's strong cloud demand and strategic pivot towards AI-driven solutions have bolstered investor confidence.

Cisco's Ethernet switches and routers, used in data centers, have seen surging demand as companies ramp up their investments in artificial-intelligence infrastructure. The company's order growth from hyperscalers and improving demand from telco customers to equip their networks for AI-led traffic demand have contributed to this positive momentum.



Despite the potential impact of Trump's tariffs, Cisco has taken proactive measures to mitigate the risks. The company has reduced its exposure in China by 80 percent and planned out several scenarios for other tariff increases. Cisco has also modeled the impact of the tariffs the Trump administration has announced on steel and aluminum imports. The company's adjusted gross margin forecast for the third quarter has the cost of the proposed tariffs built into it, indicating that Cisco is prepared to face these challenges.

Cisco's Chief Financial Officer, Scott Herren, has stated that the company is prepared to take actions to mitigate the impact of tariffs as and when they go into effect. The company's strategic shift towards AI infrastructure and its strong cloud demand have positioned it well to navigate the current geopolitical climate and ensure business continuity.

Cisco's CEO, Chuck Robbins, has expressed confidence in the company's ability to ride out the potential negative effects of tariffs by reconfiguring its supply chain if necessary. The company's focus on solid execution and operating discipline, while making strategic investments to drive innovation and growth, has further bolstered its resilience in the face of geopolitical challenges.

In conclusion, Cisco's shares have surged amid strong demand for AI gear and the company's strategic pivot towards AI-driven solutions. Despite the uncertainty surrounding Trump's tariffs, Cisco's proactive measures and focus on strategic investments have positioned it well to navigate the current geopolitical climate and ensure business continuity. As the company continues to adapt to the evolving market landscape, investors can expect Cisco to maintain its competitive position in the market.