Traditional Tech Giants like Cisco (CSCO) and IBM Shine Amid AI Growth

Despite a challenging start for major tech stocks in 2025, traditional technology companies like Cisco (CSCO, Financial), IBM (IBM), and Oracle (ORCL) are gaining renewed market attention. These companies have exceeded expectations and are positioned as potential winners in the booming AI sector. They are attractive to investors due to their lower valuations and attractive dividend yields compared to more renowned AI stocks.

Amid uncertainties in interest rates and import tariffs, these mature companies exhibit defensive characteristics highly valued during economic instability. Cisco, once overlooked in the current tech landscape, recently reported better-than-expected earnings, highlighting robust demand for AI infrastructure, which propelled its stock to new heights since 2000. Despite lagging behind tech giants in the S&P 500 Index, Cisco’s stock has risen nearly 10% this year, while IBM and Oracle have increased 19% and 4.5%, respectively.

The rekindled interest in stocks like Cisco as an investment theme also applies to IBM, which has seen a strong rebound after years of stagnation. IBM’s revenue growth projections and rising AI-related orders suggest a positive long-term sales outlook. Similarly, Oracle is recognized as a key player in cloud computing alongside Microsoft, Amazon, and Alphabet.

These traditional tech stocks offer lower valuations, making them appealing compared to the U.S. Big Seven Index, which trades at a price-to-earnings ratio over 30. Cisco and IBM’s dividend yields exceed 2.5%, unusually high for tech companies. These factors make them attractive amid macroeconomic uncertainties, including inflation, geopolitical tensions, and trade wars.

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