Josh — I recall my days as a retail stockbroker back in 1999, pitching shares of Mellon Bank to my clients. This was a time when the repeal of the Glass-Steagall Act under President Bill Clinton led to a flurry of bank and brokerage mergers. Notable buyouts included PaineWebber by UBS and JPMorgan by Chase Manhattan. My pitch was that Mellon was a prime candidate for acquisition, which indeed happened in 2007 when it was bought by the Bank of New York. However, my colleagues in the boardroom thought I was wasting my time. They were focused on high-flying tech stocks like Dell, Cisco, and EMC, which were doubling and tripling in value every few months.
While I was aiming for modest gains, they were swinging for the fences. It was the dawn of the Internet 1.0 era, and I was discussing deposits and savings account growth. One colleague, who had recently shifted from pitching Bristol Myers to fiber optics, boldly declared, “I will never pitch a non-technology stock to my clients again. Everything else is a waste of time.”
This anecdote highlights how many of the stocks we were excited about during that period, often referred to as “the boxmakers,” fell out of favor after the Dotcom Bubble burst. Companies like Cisco and IBM languished for nearly two decades, while Dell struggled after going private. New tech growth stories emerged, focusing on software, wireless communications, and social media, leaving the old guard behind.
Fast forward to today, and we find ourselves in the Internet 3.0 era, characterized by an AI datacenter buildout that heavily relies on next-generation equipment. Cloud providers are purchasing millions of modern “boxes” each quarter, and it’s fascinating to see some of the stocks from my earlier days making a resurgence.
Sean will share the usual Monday charts and explain how Dell, HP, and Cisco have regained relevance for growth investors, while I will provide some technical insights.
As of September 29, there are 211 names on The Best Stocks in the Market list. Notably, IBM was added last week, with its AI strategy centered on watsonx, an enterprise platform designed to help companies build and deploy generative AI and machine-learning models across hybrid cloud environments. A recent Bank of America report highlighted key players in the 2025 data center buildout, including Nvidia, Arista, and even some legacy tech names like IBM, Cisco, Dell, and HPE.
For instance, Dell plays a crucial role in data center infrastructure, providing servers, storage, and networking solutions. HPE, which was spun off from HP, offers modular data center architectures to enhance deployment and energy efficiency. Cisco, a reminder of the tech bubble’s impact, supplies networking gear and AI-driven management software essential for efficient data movement in AI-heavy data centers.
Interestingly, over the past year, IBM has risen by 29%, Cisco by 28%, HPE by 27%, and Dell by 12%.
Risk Management: Josh — Let’s focus on Cisco, which is nearing its old highs above $70 per share, reminiscent of its peak during the Dotcom boom in 2000. A comparison of its valuation then and now reveals a significant shift. Cisco’s PE ratio has dropped from 250 times earnings to around 25 times today. This modern Cisco is a more diversified business, with its software and cybersecurity segments adding to its appeal.
While the stock is approaching a 25-year high, I believe it’s a compelling buy as long as we respect the support line around $60. The upcoming earnings report on November 12 provides an opportunity for accumulation if you anticipate positive surprises.
Dell Technologies reached a new high in May 2024 but has since been consolidating. It has struggled to maintain its position in the 140s, and I recommend waiting for a strong breakout above this level before considering an investment.
Lastly, HPE has established itself as a standalone entity since its separation from HPQ ten years ago. It has been thriving amid increased capital expenditure from tech giants. HPE’s stock has broken above its January highs and is currently retesting that breakout level. Investors should manage risk with a line in the sand at $20, the top of a breakaway gap from late June.
In summary, the resurgence of these legacy tech stocks in the age of AI is noteworthy, and careful risk management will be crucial for investors navigating this evolving landscape.
