This Undervalued Sleeper from ’99 Could Be 2025’s Biggest AI Winner

Everyone’s comparing today’s AI-driven market to the late ’90s tech boom (because clearly, we didn’t learn our lesson the first time). But instead of debating whether this bubble will pop (and if you should trade your stocks for gold bars and canned beans), let’s talk about one stock that crushed it 20 years ago and might be quietly staging a surprise encore.

The same year Brad Pitt’s Fight Club came out, Cisco Systems was the tech world’s rock star, pulling off insane gains of 130% in 1999 (and let’s not forget the 149% it racked up in 1998). But when the dot-com bubble burst, Cisco’s glory days went up in smoke like a straw house. For two decades, it’s been the tech equivalent of "Remember that guy?" (or is that the stuff you use to bake a pie?). But here in 2024, Cisco’s got its eyes on a comeback, and this time, it’s leveraging the AI boom for a hint of nostalgia. Simply put: Cisco is making some pretty impressive moves. They recently teamed up with Nvidia to launch AI-optimized servers packed with the same GPUs that make ChatGPT sound smart (most of the time). These AI servers are designed for enterprise customers… you know, the ones with deep pockets and zero patience for subpar tech.

What’s wild is that AI still only accounts for about 2% of Cisco’s revenue. Tigress Financial analyst Ivan Feinseth is betting big, saying "more AI" could skyrocket its valuation significantly. He’s upped their price target for Cisco to $78, which is a 32% climb from where it’s sitting now. Not exactly meme-stock level hype, but hey, steady growth beats a pump-and-dump any day. Unlike Nvidia, which trades like it’s already cured cancer, Cisco is shockingly affordable. Its forward P/E ratio is 14.9, compared to the ballooning 25x average for its networking peers. Plus, Cisco’s stock has climbed 25% over the last six months. Not bad for a company that’s been stuck in "the good ole days" territory for two decades. Speaking of institutional love, Cisco’s trading volume recently spiked, signaling that the big-money players are starting to warm up to this comeback kid. When the wealthy jump in, you know there’s more than just hype at play.

Cisco’s $25 billion Splunk acquisition is another ace up its sleeve. Splunk’s expertise in data analytics and cybersecurity complements Cisco’s traditional strengths and gives it a foothold in two high-growth markets. And let’s not forget the $1 billion in AI-related product orders it’s projecting for fiscal 2025. 

Also worth noting… unlike a lot of shiny object chasers, Cisco isn’t willing to blow up its margins to chase AI hype. It’s "picking and choosing its spots," according to analysts, which means it’s staying disciplined while making sure its bets actually pay off. Timing is everything. As enterprises scramble to upgrade their IT infrastructure for AI, Cisco’s legacy expertise in networking makes it a natural partner. Its stock has formed a saucer-with-handle base (fancy chart lingo for "investors are digging this"), and the 31% gain in just four months suggests momentum is on its side.

Add to that the fact that Cisco’s fiscal 2025 revenue forecast ($55.3 billion to $56.3 billion) includes $1 billion in AI-driven orders. Not bad for a company that was written off as yesterday’s news.

So, is Cisco going to knock off Nvidia as the leader of AI innovation? No, and it doesn’t need to. What it offers is a way to play the AI boom without paying sky-high valuations or betting on hype alone. With its solid fundamentals, growing AI presence, and (my favorite part) a valuation that actually makes sense, Cisco’s one of my favorite plays going into 2025.

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Stock.News does not have positions in companies mentioned.