Featured Story
Intel and telcos left in virtual RAN limbo by rise of AI RAN
A multitude of general-purpose and specialist silicon options now confronts the world's 5G community, while Intel's future in telecom remains uncertain.
Cisco has pegged many of its corporate hopes on its ability to cash in on massive AI investments. Some analysts see plenty of opportunity in the vendor's gambit.
Cisco is clearly working to catch the rising AI wave. And according to some market watchers, it's poised to succeed.
"Definitely looking up," summarized Will Townsend, when questioned about Cisco's overall AI stance.
Townsend, an analyst with Moor Insights & Strategy, recently attended a Cisco event focused on the company's new AI defense products. The offering is part of Cisco's broader efforts to build an "easy button" for enterprises looking to deploy AI products and services.
Townsend isn't alone in eyeing Cisco's AI efforts.
"Cisco could also benefit from the multi-phase cycle of DC [data center] buildouts," wrote the financial analysts at BofA Global Research in a recent note to investors. "We favor Cisco's stock and believe the company's focus on cloud, AI infrastructure and cybersecurity could help improve the revenue growth profile over time."
Some investors have already taken note. Cisco's shares have risen 30% during the past six months. That's likely because Cisco has increasingly pinned much of its corporate story around AI.
In its most recent quarter, Cisco said it scored $300 million in AI infrastructure orders from unnamed webscale customers. And company officials added that Cisco remains on track to exceed its target of $1 billion in AI orders from webscale customers during its current fiscal year.
The wider context
Cisco is one of dozens of companies hoping to profit from a historic age of investments into AI and the data centers where those applications will live.
According to Synergy Research Group, worldwide spending on data center hardware and software in 2024 will grow by 34% from 2023, "pushing it to an all-time high."
Google, Meta, Amazon and others led much of that investment. Indeed, according to the BofA analysts, those cloud companies are expected to grow their total capital expenses by more than 50% in 2024 – with an additional 22% growth in 2025. Much of that is due to the expensive hardware required to run high-performance AI applications in the cloud.
Just this week, SoftBank, Oracle and OpenAI pledged to invest half a trillion dollars over the next four years into building new AI data centers in the US (though billionaire Elon Musk disputes that figure).
Regardless, the analysts at BofA told investors to expect data center investments to evolve through three different phases. The first is clear and happening now: Big cloud companies like Microsoft and Meta are investing in data centers for generative AI (GenAI) applications. The second phase will include smaller cloud players – think Oracle, Bytedance and Apple – building their own AI infrastructure.
"Lastly, phase 3 is related to enterprises finding the right applications for the trained AI models," the analysts wrote. "We expect this phase to have slightly different characteristics, as we believe enterprises will build their own edge cloud capabilities for inferencing purposes."
All that investment is drawing a variety of new faces into the sector, including those that have traditionally sat in the smartphone market. For example, Nokia – at one time a smartphone company – is now touting its sales into AI data centers. And Qualcomm – which mainly makes chips for smartphones – is reportedly preparing silicon for data center applications.
But for Cisco, the company will have to continue to navigate data center competition among a variety of players. One of them is Nvidia, now the world's largest company by market capitalization. Others include Huawei, Nokia, Arista Networks, Juniper Networks, Dell Technologies, Hewlett Packard Enterprise (HPE), Amazon Web Services (AWS) and Microsoft, among many others.
The Cisco angle
In AI data centers, Cisco is playing in a massive opportunity, according to Synergy Research Group. The firm reported that total global data center infrastructure equipment revenues, including both cloud and non-cloud hardware and software, will reach $282 billion in 2024, with public cloud infrastructure accounting for $156 billion of that total.
And in its recent tally of data center equipment suppliers, Synergy named Cisco among a handful of big players. Cisco is the leader in the networking segment, according to Synergy.
John Dinsdale, Synergy's chief analyst, told Light Reading that Cisco's overall market share is around the 5% mark across all types of data centers and across all hardware and software segments. "Cisco's share is higher than that for the enterprise data center market, and lower for the public cloud data center market," he wrote.
Dinsdale wouldn't provide specific market share figures. But within the data center segment, he reported that Cisco is the market share leader "by some distance" when it comes to service provider routers. He also said Cisco leads in enterprise routers, Ethernet switches and network security.
In their report, the BofA analysts offered some additional details on Cisco's place in the data center industry. In the $11 billion optical networking market, for example, the analysts reported that Ciena leads the space and that Cisco's share is just 4.6%. And in the hyperscaler portion of the data center switching market, they reported that Cisco has a minimal 1.6% share.
But in routing solutions that connect data centers, the BofA analysts said Cisco is the dominant player with 31.8% share – Nokia, Huawei and Juniper, meanwhile, each have around 18% share. Cisco is also the commanding leader in the core routing market, they added.
In edge routing – an area poised for growth thanks to AI inferencing – the BofA analysts found that Cisco holds 26.1% share, slightly lower than Nokia's 28.7% share and higher than Huawei's 18.9%.
"We believe this market could experience higher than historical growth ... due to Data Center Interconnect (DCI) deployments by cloud titans on the back of buildouts of Ethernet-based AI networks," the analysts wrote.
You May Also Like