Cool CPI Data Pushes Tech Stocks to Records, Then Cisco's AI Guidance Rattles Investors

The S&P 500 closed at a record 7,757.64 after tame July CPI data, but Cisco Systems Inc. shares fell 4.6% to $118.18 in after-hours trading despite record fiscal Q4 revenue of $17.3 billion, as the company warned that a heavier mix of AI hardware sales would pressure gross margins. Cisco raised its full-year AI infrastructure order forecast to $9 billion, nearly double its earlier $5 billion target, after orders reached $5.3 billion through the first three quarters.

A tamer-than-feared inflation report sent the S&P 500 to a record close this week, but Cisco's earnings a day later showed the AI trade isn't a straight line up. The July consumer price index rose 3.4% year over year, with core CPI up 2.5%, the lowest core reading since February 2026, according to CNBC's coverage of the report. That's not exactly a return to the Fed's 2% target. But it was tame enough. Traders had been bracing for a hotter number, and when it didn't show up, rate-hike bets eased and money poured back into tech. The S&P 500 closed at a record 7,757.64 after its best week since April, and the Nasdaq jumped 5.19% over the same stretch to 26,690.62, according to data cited by Bloomberg. You could see exactly where the money went. CoreWeave, the AI cloud provider that's become a bellwether for data center spending, rose as much as 24% on the week. Super Micro Computer gained nearly 18%. Both companies had reported results that reaffirmed the market's favorite thesis right now: that AI infrastructure demand is real, is growing, and isn't slowing down anytime soon. CME futures pricing showed traders split roughly evenly on whether the Fed holds or moves again in September, but the direction of travel, for now, favors patience over more hikes. Cisco reported fiscal fourth-quarter results on August 12, and the headline numbers were strong. Revenue hit a record $17.3 billion, up 18% year over year, and non-GAAP earnings came in at $1.22 a share, up 23%, beating the company's own guidance range. Cisco also raised its full-year AI infrastructure order forecast to $9 billion, nearly double the $5 billion target it had set earlier, after orders already reached $5.3 billion through the first three quarters, according to reporting from The Motley Fool. The stock still fell. Shares dropped 4.6% in after-hours trading to $118.18, according to SiliconANGLE's account of the report. The reason wasn't demand. It was margins. Cisco told investors that a heavier mix of AI hardware sales would keep pressure on gross margins going forward, and for a market that's been pricing AI infrastructure companies for software-like profitability, hardware-like margins are a letdown. Cisco is guiding to $18 billion to $18.2 billion in revenue for the current quarter and, for fiscal 2027, targeting $72.2 billion to $73.4 billion in total sales. That's the tension sitting underneath this week's rally. Cooler inflation data did more for tech valuations in a single morning than most companies' earnings calls manage all quarter, because it changes the discount rate every growth stock gets valued against. Lower expected rates make future AI profits worth more today, full stop. But Cisco's numbers make the point plainly: not every AI dollar converts to profit at the same rate. Orders surging 4.5 times isn't the same thing as margin expansion, and investors who spent all of 2025 rewarding any AI order growth are starting to ask what it actually costs to fulfill those orders. Frankly, this is the split to watch for the rest of the year. CoreWeave and Super Micro rallied because their numbers suggested the AI buildout keeps accelerating. Cisco beat on revenue and still got punished, because Wall Street is done treating Also read: YMTC Overtook Kioxia in NAND Flash Shipments for the First Time https://startupfortune.com/ymtc-overtook-kioxia-in-nand-flash-shipments-for-the-first-time/ • Investors Are Already Pricing Anthropic As A $2 Trillion Company https://startupfortune.com/investors-are-already-pricing-anthropic-as-a-2-trillion-company/ • Google's Gemini App Just Hit 1 Billion Monthly Users and Closed the Gap With ChatGPT https://startupfortune.com/googles-gemini-app-just-hit-1-billion-monthly-users-and-closed-the-gap-with-chatgpt/