Cisco Systems (CSCO): The Undervalued Backbone of AI Infrastructure
28min read
Aime SummaryIn the race to build the infrastructure of the AI era,
(CSCO) has quietly positioned itself as the most underrated player. While tech giants like and dominate headlines, Cisco's strategic acquisitions, partnerships, and financial discipline have created a compelling case for a revaluation akin to Oracle's (ORCL) transformation in the 2000s cloud era. With AI infrastructure demand surging and trading at a discount to its fundamentals, the stage is set for a market reassessment.A Discounted Valuation Amid AI's Tipping Point
Cisco's current valuation metrics suggest it is significantly undervalued relative to its peers. As of July 2025,
trades at a forward P/E of 13.26, well below Oracle's historical P/E of 36.20 during its 2000s cloud revaluation. Even more striking is CSCO's PEG ratio of 3.24, which, while high on the surface, reflects a 5-year EBITDA growth rate of just 10.10%. However, this metric fails to capture the explosive demand for AI infrastructure, where Cisco's enterprise customers are spending at a pace exceeding expectations.
Cisco's EV/EBITDA of 19.25 also appears elevated compared to Oracle's historical 12.23 in 2006, but this is misleading. Oracle's revaluation in the 2000s was driven by a shift to cloud software, while Cisco is now pivoting to secure, scalable AI infrastructure. With $52 billion in trailing revenue and $9.5 billion in net cash, Cisco's balance sheet is a fortress, allowing it to fund growth without dilution.
Strategic Moves: From Defense to Offense
Cisco's undervaluation is being rectified through a series of acquisitions and partnerships that align with AI's infrastructure needs. The $1 billion global AI investment fund launched in 2024 has targeted startups like Cohere, Scale AI, and Gruve.ai, which specialize in outcome-based AI solutions. These investments are not speculative—they directly enhance Cisco's ability to offer AI-native services, from secure data centers to automated network optimization.
Key acquisitions like Robust Intelligence (2024) and SnapAttack (2025) have fortified Cisco's AI security portfolio. The integration of Cisco AI Defense into its SecureX platform ensures enterprises can protect against AI-driven cyberthreats, a critical differentiator as AI adoption accelerates. Meanwhile, the $350 million in AI infrastructure orders during Q2 2025—surpassing $1 billion in total for the first half of the fiscal year—proves demand is outpacing skepticism.
Collaborations with NVIDIA, HUMAIN, and G42 further underscore Cisco's AI ambitions. The Cisco Secure AI Factory with NVIDIA, for instance, provides enterprises with co-optimized hardware and software to deploy AI workloads securely. In the Middle East, partnerships with Saudi Arabia's HUMAIN and UAE-based G42 are positioning Cisco as a key enabler of regional AI ecosystems, leveraging its expertise in large-scale networking for global service providers.
The Parallels: From Software to AI Infrastructure
Oracle's revaluation in the 2000s was driven by its pivot from on-premises software to cloud infrastructure. Cisco is replicating this playbook by transitioning from traditional networking to AI-ready infrastructure. Its Unified Nexus Dashboard and 400G BiDi optics are designed to handle the massive data flows required for AI training and inference, while Agentic AI tools like AI Canvas and Renewals Agent streamline operations for IT teams.
The parallels extend to financial metrics. Oracle's P/E ratio rose from 12.23 in 2006 to 36.20 in 2025 as the market recognized its cloud potential. Cisco's P/E of 13.26, despite its stronger balance sheet, suggests it is being valued as a traditional hardware company rather than a critical enabler of AI infrastructure. This disconnect creates an opportunity: as AI demand grows, investors are likely to reprice Cisco's stock to reflect its role in securing and scaling AI workloads.
Investment Case: A Revaluation Play With Margin of Safety
Cisco's undervaluation is further justified by its financial discipline. With a ROE of 21.36% and a ROIC of 9.67%, the company is generating returns that outpace many tech peers. Its $9.5 billion in net cash also provides a buffer against market volatility, a stark contrast to Oracle's debt-heavy expansion in the 2000s.
For investors, the risk-reward profile is compelling. Cisco's current P/E of 13.26 implies a 60% upside to Oracle's historical revaluation peak of 36.20, assuming similar growth dynamics. Meanwhile, its strategic investments in AI startups and partnerships with industry leaders like NVIDIA and NVIDIA create a moat that is difficult for pure-play AI vendors to replicate.
Conclusion: The Undervalued AI Backbone
Cisco Systems is not just a hardware company—it is the backbone of the AI infrastructure revolution. Its strategic acquisitions, partnerships, and financial strength position it to benefit from the same revaluation dynamics that propelled Oracle in the 2000s. As AI-driven networking demand accelerates, investors who recognize Cisco's role in securing and scaling this infrastructure will likely reap outsized rewards. For now, CSCO remains a compelling undervalued play in the AI boom.
Investment Advice: Buy CSCO on dips, targeting a 30–40% return as the market reprices its AI infrastructure role. Monitor AI infrastructure order growth and partnerships with NVIDIA for catalysts.
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