Private company valuations ‘going nuts again’ amid AI boom, Cisco CEO says

The valuations of some private companies are “going nuts again,” returning to highs not seen since the Covid-19 pandemic, according to Cisco’s chief executive.

Chuck Robbins told CNBC Tuesday that businesses focused on new technologies like artificial intelligence were garnering price tags akin to those seen during the era of low interest rates.

“When you get into gen [generative] AI and some of these other things, we are seeing some of the private valuations are going nuts again,” he said during a CNBC-moderated panel event at the World Economic Forum in Davos, Switzerland.

Robbins said that it was “ironic” that the cycle had recurred so soon after higher interest rates had put an end to the era of easy money and seemingly corrected sometimes overinflated valuations.

“It is ironic to me that we’re so quickly doing this after what we experienced 48 months ago. It’s just incredible,” he said.

Robbins was joined on the panel by Nasdaq CEO Adena Friedman, who said that investors were currently hyper focused on innovations in AI, with many driven by the fear of missing out.

“When it comes to AI, they’re just afraid they’re going to be left behind again,” she said.

“They are going to get wrapped up in what’s the next wave, what’s the next potential. They don’t want to get left behind, they want to be early,” she added.

Friedman noted, however, that investors now have to balance that enthusiasm with a higher interest rate environment, where such bets come with a higher price tag.

“The challenge to them is now they have a real cost of capital and the companies that they’re investing in have a real cost of capital. That’s a very different investment thesis,” she said.