Nvidia and the Ghost of Cisco

Nvidia’s rise has been nothing short of meteoric: stock is up by over 300 per cent in 2 years, with a market cap exceeding $3 trillion. The American technology company has rapidly grown to the world leader in AI, and is treated as the single most important driver of the S&P 500 and Nasdaq. However, we’ve seen this before – the early 2000s saw the rise of Cisco, riding the dot-com wave to become the world’s most valuable company within 5 years – before crashing by 80 per cent. The question to ask is – is this AI-fuelled surge the start of a new tech era – or another dot-com style bubble?

Cisco – The Dot-Com Darling

Cisco was the backbone of the internet boom, as the internet’s “plumber” – producing routers and switches for computing networks. These carried the data which made websites, emails, and the dot-com dream viable. Between 1992 and 2000, Cisco’s value exploded to $555 billion, a share price increase of nearly 1000%.

Investors convinced themselves into thinking internet traffic would grow eternally. Cisco traded at over 100 times earnings, but nobody cared – they were making millions.

In March 2000, the dot-com bubble burst. Cisco’s revenues slowed, valuations shrunk, and the stock price collapsed by over 80% by 2002. Investors who bought Cisco at the peak are still underwater 25 years later.

A key takeaway is that the internet survived, so did Cisco. But the investors who piled in, paid the price.

Nvidia – Wall Street’s New Favourite Child

Nvidia today is what Cisco was in 1999. Just as Cisco was the backbone of the dot-com era, Nvidia’s chips power everything from Tesla’s self-driving cars to ChatGPT.

The growth has been staggering – four years ago, Nvidia’s market cap was around $545 billion. In July of this year, they became the first public company to achieve a $4 trillion cap. In addition, Nvidia accounted for 25% of the S&P 500’s 17% gain in 2024 – it’s safe to say that Nvidia has become the single most important stock in the global market.

However, even Rome fell. Nvidia is facing rising competition from AMD, Intel, and even its own biggest customers. Google has its own TPU chips, whilst Amazon has built Trainium processors.

Furthermore, China is pushing back – companies like Alibaba are blocked by government from buying Nvidia’s high-end chips, whilst the US has imposed strict export controls for Nvidia chips to China, limiting the company’s access to massive, integral markets.

Moreover, nearly all of Nvidia’s chips are produced by Taiwan-based TSMC. With rising cross-strait tensions, the company’s vulnerability is rising – not exactly a comforting thought for investors.

The bottom line is: if sentiment shifts, whether from competition or geopolitical tensions, Nvidia’s bubble could pop in a matter of moments.

The Uncomfortable Parallels

The parallels are undeniable – both Cisco and Nvidia have dominated its respective industries with weak competition, a stretched valuation, investors seem to talk about them as if they’re invincible, and they lead a technology revolution, supplying the “picks and shovels”.

However – Cisco’s profits were only speculative; Nvidia’s profits are exploding – in 2024, they grew by 580% YOY, whilst Cisco’s profits were largely based on future promises rather than current reality.

The truth is, Nvidia may very well dominate for years, just as Cisco survived the dot-com crash. But investors must acknowledge the risk that Nvidia’s stock may face a catastrophic downfall, even if the AI revolution succeeds.

As Sir John Templeton once said – “The most dangerous words in investing are: this time is different”.

Buyer Beware

If AI is truly the future, then Nvidia is its beating heart. The company is not going away, just as Cisco didn’t go away after the dot-com crash. But for investors, this does not mean it’s safe.

Whilst Nvidia may be the engine in the next decade of technological growth, the stock market is not a one-way bet.

The AI boom may prove even bigger than the dot-com era, as signalled by Nvidia’s stock price of around $170 as of September 17 2025; however, investors should act with caution – the ride may fail to end in glory.

All-in-all, history tends to repeat itself.