00:00This is, I think, an interesting story, Wujin, because we see the negative reaction in Cisco shares today.
00:04The memory chip makers obviously are doing well.
00:07But I think the story is AI is once again making Cisco like an incredibly relevant company.
00:15Not that it wasn't before, but more relevant, let's say.
00:18Is that the case?
00:20Hey, Matt, that's exactly the point.
00:22And I think that's one thing that investors are missing out on.
00:25You know, Cisco really wasn't in the hyperscale cloud customer base.
00:30You know, they had high-end switches, and they were primarily an enterprise and corporate switching networking gear company.
00:38But they have chips, optical components that cater very, very well to the hyperscale cloud customers.
00:45And they are very much into the conversation for AI and hyperscale deployments over the next couple of years.
00:50Wujin, what can Cisco and its peers do to mitigate some of the margin pressures they're facing?
00:57Well, you know, on the callbacks yesterday, they're changing some terms of the contracts to their end customers.
01:04I'll tell you an interesting tidbit.
01:06It seems as if since the memory cost is affecting everybody, it's a shared burden.
01:12So, interestingly, the cloud guys are actually taking in some of the memory costs or absorbing some of those memory
01:20costs themselves.
01:21And that's probably some of the reasons why the cloud CapEx went up for this year.
01:27I mean, CapEx is just the name of the game this year.
01:31$650 billion in hyperscaler CapEx.
01:34You've got to think that a decent portion of that is going to go to Cisco.
01:38Who are the other hardware companies that are benefiting from that amazing spend?
01:43I mean, obviously, we know NVIDIA, right, Wujin?
01:46But who are those that you may not be thinking about?
01:49Yeah.
01:50So, you know, I love talking about this topic because there's this whole layer and ecosystem of AI companies.
01:58Arista, which reports tonight, they sell networking gear to Meta.
02:03Celestica, a Canadian-based company.
02:05And then Corning, that stock has risen primarily because they sell a lot of fiber optic cables to the hyperscale
02:11guys.
02:11So I call that the CC&A.
02:14So Cisco, Corning, Celestica, and Arista as some of the names that people should be aware of.
02:20Is there anyone that gets left behind in this Wujin that's not keeping up?
02:24Well, it's a very narrow race, right?
02:27When I think about networking companies for the hyperscalers, it's principally Arista, NVIDIA, and Celestica.
02:35Cisco has small share, but they have other layers of the network.
02:38But, you know, the broader players, they'll probably won't have, you know, a foot in the door here.
02:45You're looking at hardware specifically, Wujin, but what do you make of the SaaS-pocalypse?
02:51What do you make of the devaluation in software stocks because of, you know, expected AI disruption?
03:00Yeah, look, there is a case to be made there, right?
03:03Because I think there's a lot of uncertainty out there, Matt, in terms of how SaaS models are built.
03:10You're going from a user-based model to an agent-based model.
03:14And it is going to disrupt how traditional software-based software models are built.
03:21And any time when you have this type of transition, I remember the perpetual to the cloud-based transition.
03:27It was two to three years of pain that the software companies had to endure before the revenue models worked
03:32out.
03:32We may see something similar to that with AI with some of these SaaS-based names.
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