AI bull marks the revenge of the Dotcom ‘boxmakers’ like Cisco, Dell. How to trade the stocks from here
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — I remember being a retail stockbroker in 1999, pitching shares of Mellon Bank to my retail brokerage customers. After the repeal of the Glass-Steagall Act under President Bill Clinton, a wave of bank and brokerage mergers and acquisitions had taken place. These included the buyouts of PaineWebber by UBS, Donaldson Lufkin & Jenrette by Credit Suisse, JPMorgan by Chase Manhattan, Bank of America by NationsBank and Citicorp by Travelers. My pitch was that Mellon was on the shortlist to be acquired — which eventually happened in 2007 by the Bank of New York. But my pitch looked ridiculous to the other brokers in the boardroom. They couldn’t understand why I would be wasting my time looking to make clients ten or fifteen points in a stock when I could just be pitching Dell Computer, Cisco Systems, EMC or Hewlett-Packard. Yes, I’m using the original names for these companies… I’m old school like that). These stocks were doubling and tripling every few months back then. I was shooting for singles and doubles while the other brokers were swinging for the fences. They had a point, in the short-term. It was the early days of Internet 1.0 and I was talking about deposits and savings account growth. One of my colleagues who had recently switched away from a pitch on Bristol Myers to selling fiber optics companies to his clients made the statement “I will never pitch a non-technology stock to my clients ever again. Everything else is a waste of time.” I tell this story because many of the names we were enamored with in that era were what came to be known derisively as “the boxmakers” as investors threw in the towel on them. In the wake of the original Dotcom Bubble’s bursting, you couldn’t give these stocks away. Cisco and IBM went to sleep for almost two decades. Dell was taken private after struggling for what seemed like forever. New technology growth stories eventually came along that were more heavily involved in software, wireless communications, social media and semiconductors. The companies making PCs, routers and servers – big gray boxes – were never thought of or spoken about again. They were simply out of the conversation. Until now. One of the more interesting aspects of the Internet 3.0 era we’re in now — the AI datacenter buildout — is that it is heavily reliant on next-generation equipment. Millions upon millions of boxes (modern versions, of course) are being purchased every quarter, by cloud providers around the world. Old Tech is playing a huge role in the AI boom and it’s a lot of fun to see some of the stocks from my youth making a comeback all these years later. Sean is going to drop the normal Monday charts and then walk you through how Dell, HP and Cisco have become relevant again to growth investors, and I’ll be back with some technicals. Sector Leaderboard As of Sept. 29, there are 211 names on The Best Stocks in the Market list. Top Sector Ranking: Top Industries: Top 5 Best Stocks by Relative Strength: Sector spotlight: Sean — IBM was just added to the list on Friday of last week. IBM’s AI strategy centers on watsonx, its enterprise platform that helps companies build, govern, and deploy generative AI and machine-learning models across hybrid cloud environments. Bank of America recently detailed in a report all the companies involved in building a data center in 2025. In the report, he 800-pound gorilla of the data center build Nvidia is there, along with other sexy names like Arista, Huawei, and SMCI. I was surprised when I saw some of the old-guard tech names involved. Names like IBM, CSCO, Dell and even HPE (HP split into two companies, HPQ and HPE). Take Dell for example. Dell plays a big role in data center build-outs by providing the core infrastructure — servers, storage, networking — and modular data center solutions that bundle racks, power, and cooling for data center deployment. HPE’s chart is slightly further along; HPE offers modular and prefabricated data center architectures (e.g. “PODs” and scalable modules) to speed deployment, simplify expansion, and improve energy efficiency. And finally, there’s CSCO — the enduring reminder of what bubbles can do to a stock: CSCO is providing the networking gear and AI-driven management software that move data efficiently and securely across those AI-heavy data centers. Its last all-time high came on March 27, 2000, some 6,414 trading days and 5,145 S & P points ago. CSCO hasn’t been this close to new highs since Creed’s ‘Higher’ was climbing the Billboard charts in 2000. Left for dead after the first tech boom, these stocks are quietly staging a big comeback in the age of AI. Over the past year, IBM is up 29%, CSCO 28%, HPE 27%, and Dell 12%. Are the Creed lyrics in your head yet? Can you take me higher? Risk Management: Josh — Let’s take a look at Cisco today, approaching the old highs above $70 per share versus the last time it traded at these levels at the peak of the Dotcom boom in 2000. Specifically, let’s look at the company’s valuation then and now: Ignore that blip higher in the orange line (PE ratio) which was caused by a one-time $10.4 billion non-recurring loss due to the Tax Cuts & Jobs Act as it reclassified foreign earnings. Outside of that, you can see that Cisco’s PE ratio today is substantially lower than what we had seen previously. There was a time Cisco shares were trading at 250 times earnings while today it’s more like 25 times. This approach toward $70 per share is not anything like the last one. It should be pointed out that modern Cisco is a materially better and more diversified business than it was back then. Cisco’s software and cybersecurity business makes it a much more compelling story despite the fact that networking equipment is still the core business all these years later. By which I mean to say not to fear buying this stock at a 25-year high. Near-term it’s a little too sloppy for me, but I am okay with an entry here so long as we respect the obvious support line, which I would draw around $60. That’s the top of the breakaway gap I am showing you above from Cisco’s post-earnings rally in May. The post-earnings rally from August faded away but the stock has been consolidating in a tight little range ever since. The next earnings report is November 12th which gives you time to accumulate if you think they’ll surprise to the upside again. Dell Technologies put in an explosive new high back in May of 2024 (not shown above) and then a lower high last November. It’s been consolidating ever since with a sloppy, choppy chart that’s somehow managed to fight back to within proximity of a 52-week record. But it has failed in the 140s twice and I don’t trust it until it can break above with a strong RSI above 60, confirming. I could be persuaded that the third time is the charm as it approaches the mid-140’s but we’re not there yet. The name can’t seem to hold its 50-day which tells you the bulls are listless and not yet fully behind it. I would say to wait. Which leaves us with HPE. As Sean explained, this is the enterprise business that was separated from the HPQ consumer business selling PCs, printers and laptops. This took place exactly ten years ago, so the HPE business has had a long time to establish itself as a standalone entity in the eyes of investors. HPE sells directly into the cloud datacenter buildout – servers, data storage, IT consulting, networking equipment and software – which is why the stock has been on fire amidst increased capex guidance from the tech giants that are its customers. In the chart below, I am showing you a stock that has already broken out above its January highs and is now in the process of retesting that breakout level. Investors can risk-manage the position with a line in the sand at $20, the top of that breakaway gap in late June. Below it and something is wrong. Traders should tighten the leash and use $22, the current 50-day moving average. I don’t want to risk more than 10% in a trade with this stock given the history. We just haven’t seen a long enough uptrend for me to be confident the chop is over yet. 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