Cisco Systems

Cisco in the late 90's was the quintessential infrastructure play. Every new website, every new data center, every new enterprise network needed routers and switches, and Cisco was the dominant supplier. The result was a stock chart that went near-vertical, with valuation multiples completely decoupled from fundamentals. Nvidia today occupies a parallel position in the AI cycle. Hyperscalers, startups, and enterprises all need GPUs to train and deploy large language models. Nvidia has become the monopoly supplier of the critical component. The psychology is the same - investors extrapolate present demand into perpetuity, assuming the bottleneck product will remain irreplaceable indefinitely. The crucial similarity is that both companies were "selling shovels" during a rush, benefitting from an environment where customers were chasing speculative opportunities. The crucial difference is that Cisco's market had few technological moats, with competitors eventually commoditizing networking gear. Nvidia's moat, for now, is deeper. Between CUDA, software tooling, and the sheer complexity of GPU design, there is greater lock-in. But the competitive dynamic cannot be frozen in time - just as Cisco's dominance was eroded, Nvidia faces rivals in custom silicon, cloud provider's in-house chips, and eventual margin compression. When the dot-com bubble burst, Cisco did not disappear - rather it simply reverted to being a well-run, profitable company growing at a reasonable pace. Its valuation, however, corrected to reflect business reality rather than speculative narrative. Nvidia is likely on the same trajectory. The demand for compute will remain, but the fever pitch of AI hype will normalize. What investors need to remember is that infrastructure firms tend to be cyclical, not permanent growth engines. The lesson from Cisco is that being the shovel-maker during a gold rush guarantees revenue, but not a permanent valuation platform. Nvidia is no different, and history suggests the eventual equilibrium will look far more mundate than the story driving the current euphoria.