There are trends and then there are megatrends. The latter has the potential for earth-shattering upside. Cisco is one of the names that could stand to benefit from the megatrend of sovereign artificial intelligence (AI).
AI is an obvious trend that’s been making waves in the markets. From the latest app that uses AI technology to the chip that can process copious amounts of computing power, AI continues to captivate investors. Yes, it’s a trend that’s making waves. But what if you can invest in the whole ocean? That’s a megatrend, and it’s sovereign AI.
Apps, platforms, semiconductors, and even data centers are all part of a bigger AI infrastructure. And it’s set to grow at an alarming pace. For example, take the data in the chart below from Fortune Business Insights. In 2023, they noted AI infrastructure was pegged at $36.59 billion. In less than 10 years’ time, they see it growing by almost 10 times to $356.14 billion.
Now take that whole infrastructure and apply it to the demands of whole countries. When you scale up to that level of enormity, this is the world of sovereign AI. In essence, there are levels to this AI game, and Cisco is looking to play in the largest of them.
Cisco's Role in Sovereign AI
Gone are the days when Cisco was known for just its routers. It has a full-fledged product offering that can support an entire AI infrastructure. It still has routers, but also switches, IT security products, collaboration tools, data center solutions, cloud management platforms, internet of things solutions, and other products. These are all the essentials a country needs to build out its AI infrastructure.
A report by MSN encapsulated Cisco’s role in sovereign AI succinctly: “The sovereign AI cloud market, driven by governments and large enterprises seeking localized AI compute resources, is also expected to ramp up, and Cisco is well-positioned to be a key systems provider in this emerging space.”
As MSN noted, Cisco is firmly poised for growth and more of it in the coming years. Its last earnings report already proves its revenue-generating potency:
- Annualized recurring revenue (ARR) was up 5%
- Product ARR growth was up 8%
- Subscription revenue grew 15%
2x or 1x Inverse Cisco's Stock
Cisco’s stock is up almost 50% within the past year. If this bullish momentum sustains, traders will want to maximize their opportunities. Alternatively, they need to also hedge their bullish positions in case any short-term price corrections arise. As veteran traders know, that can happen at any time for any reason.
Direxion has pair of single-stock ETFs for both occasions. When Cisco stock rises, there’s the Direxion Daily CSCO Bull 2X ETF (CSCL ) to capture upside with 200% exposure. When price corrections happen, traders can take the other side with the Direxion Daily CSCO Bear 1X ETF (CSCS ), which generates -100% of Cisco’s daily performance.
Having exposure to both sides offers traders plenty of flexibility. They offer tactical plays without the use of margin debt, allowing for risk mitigation when it comes to one’s trading capital.
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