Cisco and Ciena Comments Support Our AI-Driven Networking Thesis
When we talk about AI, our position has been that rising adoption and expanding usage would drive demand for networking as the volume of data created, consumed, and transported explodes. We’ve seen that connect-the-dots-driven line of reasoning play out, particularly with our position in Marvell Technology ($MRVL).
While many are caught staring at the back-and-forth movements of Tuesday’s market action, we’re continuing to scour data and articles to update our thinking for the Q2 2026 earnings season that is almost around the corner. As we do this, we are keeping a watchful eye on the 50-day and 100-day moving averages for both the S&P 500 and the Nasdaq Composite.
One of the items we’re chewing through today is an interesting interview with Ciena ($CIEN) CEO Gary Smith that centers on how the telecom industry is underestimating AI’s network demand. Here are some excerpts that caught our attention:
“The amount of capacity… required just to facilitate AI… has been grossly underestimated,”
In his view, AI represents a convergence of earlier technological shifts, such as compute, storage, mobility and networking, into a single platform. “That’s the platform for AI… that’s the killer app on top…”
“The biggest owners of submarine cable capacity in the world are now the hyperscalers… it used to be all carriers,” Smith said.
The result is a supply-demand mismatch that is still playing out. Component supply, manufacturing capacity and fiber deployment are all struggling to keep pace.
That transition is also changing how operators position themselves. Smith pointed to the rise of wholesale models and managed fiber networks tailored to cloud providers and emerging “neoscaler” players focused on AI infrastructure.
“The network is a critical element now… as important as power…”
On the one hand, we recognize Smith is talking up Ciena’s business, but on the other, his comment about the importance of the network shouldn’t be ignored. We’re not simply saying that because it validates our thinking, but rather because of the growing mountain of evidence, including the next report we’re starting to size up, Cisco’s ($CSCO) recently published AI Impact on Wide Area Networks report. We’re only just getting started, but here’s one stat that caught our eye, and it’s one that likely sets the tone for the rest of the report:
Consumer adoption of AI and agentic AI is projected to drive growth in consumer-driven network traffic ~6.6×, representing 63% additional growth compared to 4x growth in non-AI scenarios in the same period—making AI the dominant driver of overall internet traffic expansion.
Against that backdrop, we remain bullish on the networking businesses inside Marvell, Broadcom ($AVGO), Nvidia ($NVDA), and Arista Networks ($ANET).
More Pro Portfolio:
- We’re Unwinding Our Hedging Positions, Adding to Two Others
- Tracking 21 Signals Across 10 of Our Investing Themes
- Weekly Roundup: Peace Deal, Warsh Arrives, and the Portfolio Moves Ahead
At the time of publication, TheStreet Pro Portfolio was long ANET, AVGO, MRVL and NVDA.
