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Our discussion started by going back to the late 1990s, when Cisco was one of the hottest stocks on the planet. At the height of the dot-com boom, it sat at the center of the internet buildout and seemed unstoppable.
The peak and the long fall
I pointed out that Cisco traded around $75 to $80 during the dot-com frenzy. When the bubble burst in 2000 and 2001, the stock collapsed and effectively disappeared from the market conversation. It did not fail as a business, but it vanished as a growth story, and for most investors, it stayed buried for decades.
Lee agreed that this is exactly what happens when expectations get wildly ahead of reality. The internet changed the world, but the valuations attached to it at the time were completely exaggerated.
Why Cisco survived
What kept Cisco alive was not hype, but necessity. Its networking equipment remained essential infrastructure. Over the years, the company continued selling routers, switches, and enterprise networking gear, and today that same core business supports data centers and AI-related buildouts.
I noted that Cisco never stopped being relevant. It simply stopped being exciting.
The lesson for modern investors
We both emphasized why this matters now. Investors chasing today’s mega-cap technology and AI leaders should remember Cisco. Even great companies can get buried by valuation excess and stay buried far longer than most people expect.
Lee made the point that if you bought Cisco at the bottom in 2001 or 2002, you did very well. But if you bought near the peak and simply held, it took roughly 25 years just to get back to even.
Dividends and patience
I also highlighted Cisco’s dividend, which became an important part of its appeal over time. It regularly showed up in our lists of technology stocks that actually pay shareholders. That income helped long-term holders survive the long wait.
We closed by agreeing that Cisco’s story is a reminder that no matter how dominant a company looks, market cycles can be brutal and unforgiving. Survival is not the same as success, and patience in technology investing can be tested for decades.
Transcript:
[00:00:04] Doug McIntyre: Lee. There’s another way to look at, tech stocks that are, big AI players, so certainly Meta (NASDAQ: META) | META Price Prediction, Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN). The assumption right now that most investors have is there’s no barrier to AI adoption. None. It’s just gonna, it’s gonna go on forever and ever, and people don’t need to worry about it.
[00:00:25] What they’re not taking into account is the fact that you cannot build an AI data center overnight. Hardly. Well, I started to look at this. There’s a three year backlog for transformers. Why? Because people are starting to build data centers and the transformer business people didn’t forecast that they were gonna need an extra a hundred thousand transformers wouldn’t, why would they?
[00:00:52] It, I’m sure it’s expensive to build a transformer. You’ve gotta hold in an inventory. Yeah.
[00:00:57] Yeah, So there are these real world, oh shucks. I didn’t think about it. There’s a, an electric wire outside myself, my house here that’s on a wooden pole. It hasn’t occurred to people that we are dealing with a grid that is ancient.
[00:01:14] Lee Jackson: Oh my God. It’s, it is ancient, It is, and you’re exactly right. and some small towns now, or smaller communities that are starting to push back because their grid is so bad anyway that their, the electricity is expensive and then, a big AI data center that’s gonna come in and then nearby and soak up more power.
[00:01:39] I think a lot of places are gonna start pushing back on this.
[00:01:42] Doug McIntyre: Yeah. So if, we’ve mentioned a lot of the positives about investing in companies that are big AI players. Oh yeah. There is one negative and people who own these stocks, my advice to people is don’t just look at the industry your company is in.
[00:01:58] Look at every single industry that touches it, right? Every single industry that could influence its success or its failure. Right now, let’s just call it the electric infrastructure in the United States is very, very old. Very old. The cost of upgrading it is in the hundreds of billions of dollars if you want to go across the whole country, at least.
[00:02:21] Lee Jackson: Oh, at least. Yeah. At least.
[00:02:23] Doug McIntyre: And the pace at which you can do it is not fast. You can’t just go out and take all these poles and everything else and say, well, we’re gonna rip ’em out and put in new ones. In some of the areas where they want to build data centers, there’s a two or three year wait before they’re gonna be able to get the electricity.
[00:02:42] Lee Jackson: Yeah, no, I, I think, and, a lot of these guys are making deals with power companies or, in the case of some, they’re going out and gonna build out in the Permian, where they have a supply of natural gas directly to a, an energy producing station out there. It’s gonna change a lot of things and again, I think, in the next 10 years, the nuclear power industry will be huge, not just because of AI and data centers, but the matter of the reality is that renewables, we hear about it all the time. All the time, well, number one, having, I’m from Texas and I have friends that I haven’t lived there in a while, but I have friends that were there two and three years ago when the renewables failed in the winter because of the snow and the ice, and it was a nightmare.
[00:03:30] And renewables, I mean, sure everybody wants clean energy and everybody wants to do the best for the environment they can. And that’s laudable, and it goes back for, at least from a Republican standpoint to Teddy Roosevelt. But the reality is that renewables are not gonna be able to fill the void when they’re doing 11% of the total, 14% of the total because they fail and weather, they’re weather related. And so that’s gonna roll into this, I think nuclears 10 years from now, we’ll see a lot more, we’ll see the kind of nuclear plants we saw when we were young, and you and I both grew up in Michigan and there was a big one in Michigan.
[00:04:09] Doug McIntyre: There’ll be more nuclear plants. The Trump administration has opened the door to more oil, right? More gas, more corn, more net gas. So as far as I’m concerned, energy is not going to be the issue. Transmission of energy is going to be the issue. Absolutely.
[00:04:28] Lee Jackson: I’m, it’ll be, and availability in some of these areas where they’re going into, it’s one thing to be in the southeast, in a corridor near DC and in that area where all those big utility companies, but you know what, if you’re out in North Dakota or South Dakota or someplace like that, where, it’s not as easily accessible, you’re exactly right.
[00:04:47] Doug McIntyre: Yeah. So anyway, for all of you who are interested in AI stocks, remember that AI stocks aren’t just AI stocks, they’re also energy stocks. They’re also grid stocks.
[00:04:58] Lee Jackson: Yep. So pick your poison when you’re going after ’em. But, it’ll be interesting to see how this, and, it’ll probably really start to manifest in the next year or so
[00:05:08] ’cause a lot of this stuff is under construction. But yeah, it’s gonna be an issue.
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