Cisco peaked at 150-180x trailing earnings vs NVIDIA at 40x
Cisco peaked at 150–180x trailing earnings during the 2000 bubble; NVIDIA trades at roughly 40x — a much more moderate valuation.
Snapshot · The a16z Show
Is AI a Bubble? | Gavin Baker on Data Centers, GPUs, and the AI Economy
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Jul 14, 2026
Where this was said
The AI Bubble Question: Dark Fiber vs. Dark GPUs
At 3:38 · chapter starts 2:50
David George opens with staggering numbers: $1 trillion of data centers in the US, plans to add $3–4 trillion over five years, a data center buildout that already dwarfs the entire US interstate highway system in inflation-adjusted dollars, and a 150x increase in Google's token processing over just 17 months [2] — Gavin Baker "10-point ROIC increase for big CapEx spenders: The biggest public GPU spenders have seen approximately a 10-point increase in return on inv…" 04:45 . The scale sounds terrifying, but Baker is unfazed [1] — Gavin Baker "In the 2000 bubble, 97% of all fiber laid in America was dark — unused and worthless. Today, every GPU is running hot. Baker's ROIC test co…" 03:38 . He walks through two key comparisons: Cisco peaked at 150–180x trailing earnings in 2000 versus NVIDIA's current ~40x multiple, and unlike dark fiber — where 97% of installed cable sat unused at the bubble's peak — every GPU is running at capacity. The most rigorous test, Baker argues, is ROIC: the biggest public GPU spenders have seen roughly a 10-point increase in their returns since ramping up CapEx [2] — Gavin Baker "10-point ROIC increase for big CapEx spenders: The biggest public GPU spenders have seen approximately a 10-point increase in return on inv…" 04:45 . The ROI on AI infrastructure spending, he concludes, has been unambiguously positive — even if future Blackwell spending will be a fair test.
150x token growth in 17 months
Google reported a 150x increase in the volume of tokens processed in just the past 17 months, demonstrating explosive real-world AI usage.
No Dark GPUs: Why AI Is Not a Bubble
In the 2000 bubble, 97% of all fiber laid in America was dark — unused and worthless. Today, every GPU is running hot. Baker's ROIC test confirms it: the biggest AI CapEx spenders have seen roughly a 10-point increase in return on invested capital since the buildout began. The numbers say this is not a bubble.
97% dark fiber at bubble peak
At the peak of the 2000 internet/telecom bubble, 97% of fiber laid in America was dark — unused and unlit — the defining sign of overbuilding.
10-point ROIC increase for big CapEx spenders
The biggest public GPU spenders have seen approximately a 10-point increase in return on invested capital since ramping up AI CapEx, signaling strong returns so far.
$300B free cash flow annually from big tech
The major hyperscalers collectively generate around $300 billion of free cash flow per year, with $500 billion of cash on their balance sheets, underwriting AI CapEx.
1 gigawatt of compute costs $40–50B on NVIDIA chips
Lighting up 1 gigawatt of AI compute capacity on NVIDIA chips costs approximately $40–50 billion.
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