- Cisco is moving on data center AI, striking deals with AMD and Nvidia
- Its actions are a bit reactive, rather than proactive
- But the Nvidia deal could be key to securing Cisco's future
Cisco has spent the last few years lurking on the sidelines as artificial intelligence (AI) rocketed to prominence. The company is now stepping into the ring with a one-two punch of announcements alongside AMD and Nvidia, seeking to carve a profitable niche for itself in the data center. But the move is reactive rather than proactive.
While Cisco waited, Nokia has been working in stealth mode for years to build up a data center product line-up and go-to-market machine. Nokia's moves go beyond its pending deal to buy switch vendor Infinera (which is expected to close this quarter). Nokia has outright stated it’s looking to supplant Cisco to become a top-two vendor alongside Arista.
Already Nokia has a big deal with Microsoft that will see Nokia equipment deployed in the cloud giant’s data centers in more than 30 countries. And Nokia just said on its Q4 2024 earnings call that it is ramping investments in its IP Networking business by €100 million ($105 million) to support data center momentum and achieve incremental net sales of €1 billion by 2028. That's more bad news for Cisco.
Adding to Cisco's problems, the company was distracted by internal upheaval that saw it lose key a key executive in its networking division: Jonathan Davidson.
But Cisco isn’t giving up the AI opportunity without a fight.
Fighting back
Earlier this month, Cisco announced it is working with chip giant AMD on new switches for AI data centers. This week, Cisco added Nvidia to its list of allies, unveiling a partnership that will see Cisco's Silicon One chips incorporated into Nvidia’s Spectrum-X Ethernet platform. Cisco said availability is set for the middle of this year. Notably, the arrangement will make Cisco the “only partner silicon included in NVIDIA Spectrum-X.”
That last little bit is significant because Nvidia said late last year that Spectrum-X was on track to become “a multi-billion-dollar product line within a year.” So, while the details of any revenue sharing from the Cisco-Nvidia deal aren’t public, it’s clear that Cisco can gain plenty from the arrangement.
(Indeed, Cisco noted in an email to Fierce after this story published that it recorded AI infrastructure orders of $700 million in the first half of its current fiscal year and is on track to hit its goal of $1 billion in this area.)
Maybe Nokia and Arista need to be on guard rather than Cisco. (It’s worth noting that HPE seemed like it was going to make a similar move to Nokia's to tackle this market. But HPE's proposed acquisition of Juniper Networks is now tangled up in a Department of Justice lawsuit.)
But maybe no one will lose out. It’s possible the rising AI tide will lift all boats.
After a downturn in 2024, Dell’Oro Group has forecast that the next five years will bring double-digit growth for front-end data center switch sales.
“Ethernet data center switch sales could surpass $180 billion over the next five years (2025-2029),” Dell’Oro VP Sameh Boujelbene said in a recent statement. “It will be fascinating to see which vendors—Accton, Arista, Celestica, Cisco, Juniper, Huawei, NVIDIA, and others—emerge as the primary beneficiaries of this growth.”