Why Nvidia’s not a dot-com era Cisco
Nvidia is evoking comparisons to Cisco circa the dot-com bubble, like in this WSJ piece that draws on the wisdom of the one-time CEO of Cisco.
The similarities: Both firms, at one time, unseated Microsoft to become the world’s biggest company by market capitalization. And both tech companies were (or are) perceived as being on the leading edge of a transformative theme.
But the key differences cannot be overstated: Nvidia’s ascendance is based on a lot less hype and hope than Cisco’s was. To echo a point made by CNBC’s Jim Cramer, Nvidia got cheaper relative to a year ago. Cisco got more expensive from March 1999 to 2020. And Nvidia got less expensive (on some traditional valuation metrics) because its earnings grew at a ridiculously fast clip.
Whether Nvidia will maintain its dominant position in the equity market or continue to justify its valuation going forward, no one really knows.
But at the very least, what happened to get Nvidia to the summit is, ex ante, at least an order of magnitude less silly than what brought Cisco to the top of the leaderboard in March 2000.
But the key differences cannot be overstated: Nvidia’s ascendance is based on a lot less hype and hope than Cisco’s was. To echo a point made by CNBC’s Jim Cramer, Nvidia got cheaper relative to a year ago. Cisco got more expensive from March 1999 to 2020. And Nvidia got less expensive (on some traditional valuation metrics) because its earnings grew at a ridiculously fast clip.
Whether Nvidia will maintain its dominant position in the equity market or continue to justify its valuation going forward, no one really knows.
But at the very least, what happened to get Nvidia to the summit is, ex ante, at least an order of magnitude less silly than what brought Cisco to the top of the leaderboard in March 2000.
