Cisco
OpenAI partners with G42 to build giant data center for Stargate UAE project
OpenAI, the maker of ChatGPT, said it was partnering with United Arab Emirates firm G42 and others to build a huge artificial-intelligence data center in Abu Dhabi, UAE. It will be the company’s first large-scale project outside the U.S. OpenAI and G42 said Thursday the data center would have a capacity of 1 gigawatt (1 GW) [1], putting it among the most powerful in the world. OpenAI and G42 didn’t disclose a cost for the huge data center, although similar projects planned in the U.S. run well over $10 billion.
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Note 1. 1 GW of continuous power is enough to run roughly one million top‑end Nvidia GPUs once cooling and power‑conversion overheads are included. That’s roughly the annual electricity used by a city the size of San Francisco or Washington.
“Think of 1MW as the backbone for a mid‑sized national‑language model serving an entire country,” Mohammed Soliman, director of the strategic technologies and cybersecurity programme at the Washington-based Middle East Institute think tank, told The National.
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The project, called Stargate UAE, is part of a broader push by the U.A.E. to become one of the world’s biggest funders of AI companies and infrastructure—and a hub for AI jobs. The Stargate project is led by G42, an AI firm controlled by Sheikh Tahnoon bin Zayed al Nahyan, the U.A.E. national-security adviser and brother of the president. As part of the deal, an enhanced version of ChatGPT would be available for free nationwide, OpenAI said.
The first 200-megawatt chunk of the data center is due to be completed by the end of 2026, while the remainder of the project hasn’t been finalized. The buildings’ construction will be funded by G42, and the data center will be operated by OpenAI and tech company Oracle, G42 said. Other partners include global tech investor, AI/GPU chip maker Nvidia and network-equipment company Cisco.
Data centers are grouped into three sizes: small, measuring up to about 1,000 square feet (93 square metres), medium, around 10,000 sqft to 50,000 sqft, and large, which are more than 50,000 sqft, according to Data Centre World. On a monthly basis, they are estimated to consume as much as 36,000kWh, 2,000MW and 10MW, respectively.
UAE has at least 17 data centers, according to data compiled by industry tracker DataCentres.com. AFP
The data-center project is the fruit of months of negotiations between the Gulf petrostate and the Trump administration that culminated in a deal last week to allow the U.A.E. to import up to 500,000 AI chips a year, people familiar with the deal have said.
That accord overturned Biden administration restrictions that limited access to cutting-edge AI chips to only the closest of U.S. allies, given concerns that the technology could fall into the hands of adversaries, particularly China.
To convince the Trump administration it was a reliable partner, the U.A.E. embarked on a multipronged charm offensive. Officials from the country publicly committed to investing more than $1.4 trillion in the U.S., used $2 billion of cryptocurrency from Trump’s World Liberty Financial to invest in a crypto company, and hosted the CEOs of the top U.S. tech companies for chats in a royal palace in Abu Dhabi.
As part of the U.S.-U.A.E agreement, the Gulf state “will fund the build-out of AI infrastructure in the U.S. at least as large and powerful as that in the UAE,” David Sacks, the Trump administration’s AI czar, said earlier this week on social media.
U.A.E. fund MGX is already an investor in Stargate, the planned $100 billion network of U.S. data centers being pushed by OpenAI and SoftBank.
Similar accords with other U.S. tech companies are expected in the future, as U.A.E. leaders seek to find other tenants for their planned 5-gigawatt data-center cluster. The project was revealed last week during Trump’s visit to the region, where local leaders showed the U.S. president a large model of the project.
The U.A.E. is betting U.S. tech giants will want servers running near users in Africa and India, slightly shaving off the time it takes to transmit data there.
Stargate U.A.E. comes amid a busy week for OpenAI. On Wednesday, a developer said it secured $11.6 billion in funding to push ahead with an expansion of a data center planned for OpenAI in Texas. OpenAI also announced it was purchasing former Apple designer Jony Ive’s startup for $6.5 billion.
References:
https://www.wsj.com/tech/open-ai-abu-dhabi-data-center-1c3e384d?mod=ai_lead_pos6
https://www.thenationalnews.com/future/technology/2025/05/24/stargate-uae-ai-g42/
Wedbush: Middle East (Saudi Arabia and UAE) to be next center of AI infrastructure boom
Cisco to join Stargate UAE consortium as a preferred tech partner
Cisco to join Stargate UAE consortium as a preferred tech partner
Cisco Systems Inc. today announced the signing of a Memorandum of Understanding (MoU) to join the Stargate UAE consortium as a preferred technology partner. The strategic MoU, signed by Cisco’s Chair and Chief Executive Officer Chuck Robbins together with other consortium partners, G42, OpenAI, Oracle, NVIDIA and SoftBank Group, envisions the construction of an AI data center in Abu Dhabi with a target capacity of 1 GW, with an initial 200 MW capacity to be delivered in 2026.
Photo Credit: Cisco
As a partner in this initiative, Cisco will provide advanced networking, security and observability solutions to accelerate the deployment of next-generation AI compute clusters.
“With the right infrastructure in place, AI can transform data into insights that empower every organization to innovate faster, tackle complex challenges, and deliver tangible outcomes,” said Chuck Robbins, Cisco Chair and CEO. “Cisco is proud to join this consortium to harness the power of AI and deliver the infrastructure that will enable tomorrow’s breakthroughs.”
Today’s announcement follows Robbins’ recent visit to Bahrain, Saudi Arabia, Qatar, and the UAE where Cisco announced a series of strategic initiatives across all phases of the AI transformation in the region. These new initiatives employ Cisco’s trusted technology across the region’s AI infrastructure buildouts, leveraging the company’s deep expertise in networking and security together with longstanding regional partnerships. By fostering the development of secure, AI-powered digital infrastructure and collaborating with key Cisco partners, the company is delivering world-class, trusted technology to the region.
More information on Cisco’s recent announcements in the Middle East is here.
“AI is the most transformative force of our time,” said Nvidia CEO Jensen Huang in a press release Thursday. “With Stargate UAE, we are building the AI infrastructure to power the country’s bold vision – to empower its people, grow its economy, and shape its future.”
The Stargate project, in collaboration with Emirati firm G42, will span 10 square miles and include a 5-gigawatt capacity. As part of the deal, OpenAI and Oracle are slated to manage a 1-gigawatt compute cluster built by G42. The project will include chips from Nvidia, while Cisco Systems will provide connectivity infrastructure.
The companies said an initial 200-megawatt AI cluster should launch next year.
References:
https://www.prnewswire.com/news-releases/cisco-joins-stargate-uae-initiative-302463388.html
https://www.cnbc.com/2025/05/22/stargate-uae-openai-nvidia-oracle.html
More information on Cisco’s recent announcements in the Middle East is here.
Wedbush: Middle East (Saudi Arabia and UAE) to be next center of AI infrastructure boom
Cisco CEO sees great potential in AI data center connectivity, silicon, optics, and optical systems
It’s no surprise to IEEE Techblog readers that Cisco’s networking business – still its biggest unit, generating nearly half its total sales – reported <$6.9 billion in revenue for the three-month period ending in January (Cisco’s second fiscal quarter). That was down 3% compared with the same quarter the year before. For its first half year, networking sales dropped 14% year-over-year, to about $13.6 billion.
However, total second-quarter revenues grew 9% year-over-year, to just less than $14 billion, boosted by the Splunk (security company) acquisition in March 2024. Thanks to that deal, Cisco’s security revenues more than doubled for the first half, to about $4.1 billion. But net income fell 8%, to roughly $2.4 billion, due partly to higher costs for research and development, as well as sales and marketing expenses.
Cisco groused about an “inventory correction” as networking customers digested stock they had already bought, but that surely is not the case now as that inventory has been worked off by its customers (ISPs, telcos, enterprise & government end users). Cisco CFO Richard Scott Herren now says “The demand that we’re seeing today a function of extended lead times like we saw a couple of years ago. That’s not the case. Our lead times are not extending.”
Currently, Cisco firmly believes that Ethernet connectivity sales to owners of AI data centers is an “emerging opportunity.” That refers to Cisco’s data center switching solutions for “web-scale” and enterprise customer intra-data center communications. The company’s AI strategy is described here.
Image Courtesy of Cisco Systems
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AI investments “will lead to our networking equipment being combined with Nvidia GPUs, and that’s how we’ll accomplish that in the future,” CEO Chuck Robbins told industry analysts on a call to discuss second-quarter results, according to a Motley Fool transcript. “There’s so much change going on right now from a technology perspective that there’s both excitement about the opportunity, and candidly, there’s a little bit of fear of slowing down too much and letting your competition get too much ahead of you. So, we saw solid demand,” he said.
However, Cisco will face mighty competition in that space.
- Nokia is targeting the same opportunity and last month said it would spend an additional €100 million (US$104 million) on its Internet Protocol unit annually with the goal of generating another €1 billion ($1.04 billion) in data center revenues by 2028.
- Arista Networks is another rival in this market, selling high performance Ethernet switches to cloud service providers like Microsoft.
- Nvidia, whose $7 billion acquisition of Mellanox in 2019 gave it effective control of InfiniBand, an alternative to Ethernet that had represented the main option for connecting GPU clusters when analysts published research on the topic in August 2023. Just as important, the Mellanox division of Nvidia also is a leader in Ethernet connectivity within data centers as described in this IEEE Techblog post.
- Juniper Networks (being acquired by HPC) is also focusing on networking the AI data center as per a white paper you can download after filling out this form.
During the Q & A, Robbins elaborated: “On the $700 million in AI orders, it’s a combination of systems, silicon, optics, and optical systems. And I think if you break it down, it’s about half is in silicon and systems. And it continues to accelerate. And I’d say the teams have done a great job on the silicon front. We’ve invested heavily in more resources there. The team is running parallel development efforts for multiple chips that are staggered in their time frames. They’ve worked hard. They were increasing the yield, which is a positive thing. And so, we feel good about it, but it’s a combination of all those things that we’re selling to the customers.”
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Enterprise AI:
“What we’re seeing on the enterprise side relative to AI is it’s still — customers are still in the very early days, and they all realize they need to figure out exactly what their use cases are. We’re starting to see some spending though on specific AI-driven infrastructure. And we think as we get AI pods out there — we got Hyperfabric coming. We got AI defense coming.
We have Hypershield in the market. And we got this new DPU switch, they are all going to be a part of the infrastructure to support these AI applications. So, we’re beginning to see it happen, but I think it’s also really important to understand that as the enterprises leverage their private data, their proprietary data, and they’ll do some training on that and then they’ll run inference obviously against that. We believe that opportunity is an order of magnitude higher than what we’ve seen in training today. We’re going to continue to innovate and build capabilities to put ourselves in a better position to be a real beneficiary as this continues to accelerate. But as of today, we feel like we’re in pretty good shape.”
“If you look at AI defense with the AI Summit that we did recently, there’s — I think there’s about 20-some-odd customers who are interested in going to proof of concept with us right now on it. We had almost half the Fortune 100 there for that event. So, I feel good about where we are. It will turn into greater demand as we just continue to scale these products.”
Telco use of AI Edge Applications:
“We see some of the European network operators are looking at delivering AI as a service,” said Robbins. “We see a lot of them planning for AI edge applications that are sitting at the edge of their networks that they’re managing for customers.”
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Cisco raised its guidance and now expects revenues for the full year of between $56 billion and $56.5 billion, up from its earlier range of $55.3 billion to $56.3 billion.
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References:
https://www.cisco.com/site/uk/en/solutions/artificial-intelligence/index.html
https://www.juniper.net/content/dam/www/assets/white-papers/us/en/networking-the-ai-data-center.pdf
Nokia selects Intel’s Justin Hotard as new CEO to increase growth in IP networking and data center connections
Initiatives and Analysis: Nokia focuses on data centers as its top growth market
Nvidia enters Data Center Ethernet market with its Spectrum-X networking platform
Networking chips and modules for AI data centers: Infiniband, Ultra Ethernet, Optical Connections
A growing portion of the billions of dollars being spent on AI data centers will go to the suppliers of networking chips, lasers, and switches that integrate thousands of GPUs and conventional micro-processors into a single AI computer cluster. AI can’t advance without advanced networks, says Nvidia’s networking chief Gilad Shainer. “The network is the most important element because it determines the way the data center will behave.”
Networking chips now account for just 5% to 10% of all AI chip spending, said Broadcom CEO Hock Tan. As the size of AI server clusters hits 500,000 or a million processors, Tan expects that networking will become 15% to 20% of a data center’s chip budget. A data center with a million or more processors will cost $100 billion to build.
The firms building the biggest AI clusters are the hyperscalers, led by Alphabet’s Google, Amazon.com, Facebook parent Meta Platforms, and Microsoft. Not far behind are Oracle, xAI, Alibaba Group Holding, and ByteDance. Earlier this month, Bloomberg reported that capex for those four hyperscalers would exceed $200 billion this year, making the year-over-year increase as much as 50%. Goldman Sachs estimates that AI data center spending will rise another 35% to 40% in 2025. Morgan Stanley expects Amazon and Microsoft to lead the pack with $96.4bn and $89.9bn of capex respectively, while Google and Meta will follow at $62.6bn and $52.3bn.
AI compute server architectures began scaling in recent years for two reasons.
1.] High end processor chips from Intel neared the end of speed gains made possible by shrinking a chip’s transistors.
2.] Computer scientists at companies such as Google and OpenAI built AI models that performed amazing feats by finding connections within large volumes of training material.
As the components of these “Large Language Models” (LLMs) grew to millions, billions, and then trillions, they began translating languages, doing college homework, handling customer support, and designing cancer drugs. But training an AI LLM is a huge task, as it calculates across billions of data points, rolls those results into new calculations, then repeats. Even with Nvidia accelerator chips to speed up those calculations, the workload has to be distributed across thousands of Nvidia processors and run for weeks.
To keep up with the distributed computing challenge, AI data centers all have two networks:
- The “front end” network which sends and receives data to/from external users —like the networks of every enterprise data center or cloud-computing center. It’s placed on the network’s outward-facing front end or boundary and typically includes equipment like high end routers, web servers, DNS servers, application servers, load balancers, firewalls, and other devices which connect to the public internet, IP-MPLS VPNs and private lines.
- A “back end” network that connects every AI processor (GPUs and conventional MPUs) and memory chip with every other processor within the AI data center. “It’s just a supercomputer made of many small processors,” says Ram Velaga, Broadcom’s chief of core switching silicon. “All of these processors have to talk to each other as if they are directly connected.” AI’s back-end networks need high bandwidth switches and network connections. Delays and congestion are expensive when each Nvidia compute node costs as much as $400,000. Idle processors waste money. Back-end networks carry huge volumes of data. When thousands of processors are exchanging results, the data crossing one of these networks in a second can equal all of the internet traffic in America.
Nvidia became one of today’s largest vendors of network gear via its acquisition of Israel based Mellanox in 2020 for $6.9 billion. CEO Jensen Huang and his colleagues realized early on that AI workloads would exceed a single box. They started using InfiniBand—a network designed for scientific supercomputers—supplied by Mellanox. InfiniBand became the standard for AI back-end networks.
While most AI dollars still go to Nvidia GPU accelerator chips, back-end networks are important enough that Nvidia has large networking sales. In the September quarter, those network sales grew 20%, to $3.1 billion. However, Ethernet is now challenging InfiniBand’s lock on AI networks. Fortunately for Nvidia, its Mellanox subsidiary also makes high speed Ethernet hardware modules. For example, xAI uses Nvidia Ethernet products in its record-size Colossus system.
While current versions of Ethernet lack InfiniBand’s tools for memory and traffic management, those are now being added in a version called Ultra Ethernet [1.]. Many hyperscalers think Ethernet will outperform InfiniBand, as clusters scale to hundreds of thousands of processors. Another attraction is that Ethernet has many competing suppliers. “All the largest guys—with an exception of Microsoft—have moved over to Ethernet,” says an anonymous network industry executive. “And even Microsoft has said that by summer of next year, they’ll move over to Ethernet, too.”
Note 1. Primary goals and mission of Ultra Ethernet Consortium (UEC): Deliver a complete architecture that optimizes Ethernet for high performance AI and HPC networking, exceeding the performance of today’s specialized technologies. UEC specifically focuses on functionality, performance, TCO, and developer and end-user friendliness, while minimizing changes to only those required and maintaining Ethernet interoperability. Additional goals: Improved bandwidth, latency, tail latency, and scale, matching tomorrow’s workloads and compute architectures. Backwards compatibility to widely-deployed APIs and definition of new APIs that are better optimized to future workloads and compute architectures.
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Ethernet back-end networks offer a big opportunity for Arista Networks, which builds switches using Broadcom chips. In the past two years, AI data centers became an important business for Arista. AI provides sales to Arista switch rivals Cisco and Juniper Networks (soon to be a part of Hewlett Packard Enterprise), but those companies aren’t as established among hyperscalers. Analysts expect Arista to get more than $1 billion from AI sales next year and predict that the total market for back-end switches could reach $15 billion in a few years. Three of the five big hyperscale operators are using Arista Ethernet switches in back-end networks, and the other two are testing them. Arista CEO Jayshree Ullal (a former SCU EECS grad student of this author/x-adjunct Professor) says that back-end network sales seem to pull along more orders for front-end gear, too.
The network chips used for AI switching are feats of engineering that rival AI processor chips. Cisco makes its own custom Ethernet switching chips, but some 80% of the chips used in other Ethernet switches comes from Broadcom, with the rest supplied mainly by Marvell. These switch chips now move 51 terabits of data a second; it’s the same amount of data that a person would consume by watching videos for 200 days straight. Next year, switching speeds will double.
The other important parts of a network are connections between computing nodes and cables. As the processor count rises, connections increase at a faster rate. A 25,000-processor cluster needs 75,000 interconnects. A million processors will need 10 million interconnects. More of those connections will be fiber optic, instead of copper or coax. As networks speed up, copper’s reach shrinks. So, expanding clusters have to “scale-out” by linking their racks with optics. “Once you move beyond a few tens of thousand, or 100,000, processors, you cannot connect anything with copper—you have to connect them with optics,” Velaga says.
AI processing chips (GPUs) exchange data at about 10 times the rate of a general-purpose processor chip. Copper has been the preferred conduit because it’s reliable and requires no extra power. At current network speeds, copper works well at lengths of up to five meters. So, hyperscalers have tried to “scale-up” within copper’s reach by packing as many processors as they can within each shelf, and rack of shelves.
Back-end connections now run at 400 gigabits per second, which is equal to a day and half of video viewing. Broadcom’s Velaga says network speeds will rise to 800 gigabits in 2025, and 1.6 terabits in 2026.
Nvidia, Broadcom, and Marvell sell optical interface products, with Marvell enjoying a strong lead in 800-gigabit interconnects. A number of companies supply lasers for optical interconnects, including Coherent, Lumentum Holdings, Applied Optoelectronics, and Chinese vendors Innolight and Eoptolink. They will all battle for the AI data center over the next few years.
A 500,000-processor cluster needs at least 750 megawatts, enough to power 500,000 homes. When AI models scale to a million or more processors, they will require gigawatts of power and have to span more than one physical data center, says Velaga.
The opportunity for optical connections reaches beyond the AI data center. That’s because there isn’t enough power. In September, Marvell, Lumentum, and Coherent demonstrated optical links for data centers as far apart as 300 miles. Nvidia’s next-generation networks will be ready to run a single AI workload across remote locations.
Some worry that AI performance will stop improving as processor counts scale. Nvidia’s Jensen Huang dismissed those concerns on his last conference call, saying that clusters of 100,000 processors or more will just be table stakes with Nvidia’s next generation of chips. Broadcom’s Velaga says he is grateful: “Jensen (Nvidia CEO) has created this massive opportunity for all of us.”
References:
https://www.datacenterdynamics.com/en/news/morgan-stanley-hyperscaler-capex-to-reach-300bn-in-2025/
https://ultraethernet.org/ultra-ethernet-specification-update/
Will AI clusters be interconnected via Infiniband or Ethernet: NVIDIA doesn’t care, but Broadcom sure does!
Will billions of dollars big tech is spending on Gen AI data centers produce a decent ROI?
Canalys & Gartner: AI investments drive growth in cloud infrastructure spending
AI Echo Chamber: “Upstream AI” companies huge spending fuels profit growth for “Downstream AI” firms
AI wave stimulates big tech spending and strong profits, but for how long?
Markets and Markets: Global AI in Networks market worth $10.9 billion in 2024; projected to reach $46.8 billion by 2029
Using a distributed synchronized fabric for parallel computing workloads- Part I
Using a distributed synchronized fabric for parallel computing workloads- Part II
HPE-Juniper combo + Cisco restructuring create enterprise network uncertainty
Hewlett Packard Enterprise’s (HPE) pending acquisition of Juniper Networks and Cisco’s recent corporate restructuring (which de-emphasizes legacy networking products like access/core routers and Ethernet switches) is putting enterprise networking customers in a holding pattern. They are pausing investments in network equipment as they wait out the uncertainty.
“I’ve had customers put things on hold right now, and not just the Juniper side but both sides,” Andre Kindness, principal analyst at Forrester Research, said in an interview with SDxCentral about how Juniper and HPE customers are reacting to uncertainty around the deal. “Typically, if customers are strong enough to look outside of Cisco and they’re not a Cisco shop, then HPE, Aruba, Juniper are the primary ones that they’re looking at. I’ve had customers put some of that on hold at this point.”
That holding pattern is tied to uncertainty over what systems and platforms will emerge from a combined HPE-Juniper. Mr. Kindness noted in a blog post when the deal was announced that “the journey ahead will be rife with obstacles for Juniper and HPE/Aruba customers alike.” Kindness explained that one important move for HPE would be to “rationalize/optimize the portfolio, the products and the solutions.”
“HPE will try to reassure you that nothing will change; it doesn’t make sense to keep everything, especially the multiple AP [access point] product lines (Instant On, Mist, and Aruba Aps), all the routing and switching operating systems (Juno, AOS-CX, and ArubaOS) and both management systems (Central and Mist),” Kindness wrote.
“Though not immediately, products will need to go and the hardware that stays will need to be changed to accommodate cloud-based management, monitoring, and AI.” HPE CEO Antonio Neri and his management team has attempted to temper these concerns by stating there is virtually no overlap between HPE and Juniper’s product lines, which Kindness said, “just boggles my mind,” he added.
Juniper’s AI product, called Marvis (part of the Mist acquisition in 2019), is by far the most advanced AI solution in the networking market. That’s not a profound statement; no vendor has anything close to it. The quick history: Juniper’s acquisition of Mist brought the company a cloud-based Wi-Fi solution with a leading AI capability, Marvis. Juniper quickly started integrating its switching and routing portfolio into Marvis. Walmart, Amazon, and others took notice. Fast-forward to today: This gives HPE Aruba a two-year lead against its competitors by bringing Juniper into the fold.
“I think [Neri’s] got to worry about the financial analyst out there in the stock market or the shareholders to pacify them, and then at the same time you don’t want to scare the bejesus out of your customer base, or Juniper customer base, so you’re going to say that there’s going to be either no overlap or no changes, everything will coexist,” Kindness said.
While overlap and other concerns could alter what a potential Juniper HPE combo looks like, Kindness said he expects the result to lean heavily on Juniper’s telecom and networking assets. That includes HPE products like Aruba networking gear being replaced by Juniper’s artificial intelligence (AI)-focused Mist and Marvis platforms.
“Mist has been really a game changer for the company and just really opened a lot of doors,” Kindness explained. “[Juniper] really did a 180 degree turn when they bought [Mist], and just the revenue that’s brought in and the expansion of the product line itself, and the capabilities of Mist and actually Marvis in the background would be hard for [HPE] to replicate at this point. My perception was HPE looked at it and said, Marvis and Mist is just something that would take too long to get to.” Kindness added that he does not expect significant platform thinning to happen for a couple of years after a potential closing of the deal, but the interim could be filled with challenges tied to channel partners and go-to-market strategies that could chip away at market opportunities similar to what is happening at VMware following the Broadcom acquisition. “Broadcom is ruthless, right or wrong, it’s its business model,” Kindness said. “HPE is not quite that dynamic.”
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Cisco CFO Scott Herren told the audience at a recent investor conference that HPE’s pending Juniper acquisition is causing “uncertainty” in the enterprise WLAN market that could be benefit Cisco. “I think for sure that’s created just a degree of uncertainty and a question of, hey, should I consider if I was previously a vendor or a customer of either of those, now is the time to kind of open up and look at other opportunities,” Herren said. “And we’ve seen our wireless business, our orders greater than $1 million grew more than 20% in the fourth quarter.”
Cisco is also working through its own networking drama as part of the vendor’s recently announced restructuring process. Those moves will see Cisco focus more on high-growth areas like AI, security, and cloud at the expense of its legacy operations, including the pairing down of its networking product lines.
“It looks like Cisco’s realizing that all the complexity of customer choice and all these variations and offering a zillion features is probably not the way to go. I think Chuck realized it,” Kindness said of Cisco’s efforts. “If you look at the ACI [Application Centric Infrastructure] and Cloud Dashboard for Nexus starting to consolidate, and then the Catalyst line and the Aironet line and the Meraki line are consolidating, it’s just the right move. The market has told them that for the last 10 years, it just took them a while to recognize it.”
References:
https://www.juniper.net/us/en.html
Cisco to lay off more than 4,000 as it shifts focus to AI and Cybersecurity
Cisco restructuring plan will result in ~4100 layoffs; focus on security and cloud based products
Cisco to lay off more than 4,000 as it shifts focus to AI and Cybersecurity
Reuters reports that Cisco Systems will cut thousands of jobs in its second round of layoffs this year. The number of people affected could be similar to or slightly higher than the 4,000 employees Cisco laid off in February, and will likely be announced as early as Wednesday with the company’s fourth-quarter results.
The San Jose, CA headquartered networking company plans to shift its product focus to higher-growth areas, such as AI and cybersecurity. It’s current set of products and services are listed here.
Cisco has been contending with weakening demand and persistent supply chain issues in its core business – routers and switches – that are used by ISPs and enterprise private networks. Two reasons for that are: 1.] the major cloud service providers design their own switch/routers or use bare metal switches (made by ODMs in Taiwan and China), and 2.] enterprise private/virtual private networks are being replaced by cloud network solutions.
- Global enterprise network sales have been declining. Dell’Oro Group reported sales contractions in Branch Routing and Campus Switching in 4Q-2023 and that is expected to continue throughout most of 2024. On premises data centers (which use Cisco Ethernet switches) are not growing. In its place……
- Enterprise spending on cloud infrastructure services is growing by leaps and bounds. It’s now nearing $80 billion per quarter. Cloud customers increased their spending on cloud services by $14.1 billion to $79.1 billion in the 2Q-2024, an increase of 22% year-over-year. It’s the third consecutive quarter in which the year-over-year growth rate was 20% or more, with generative AI being one of the factors behind the market acceleration.
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As a result of stagnant sales of its core networking products, Cisco has been pursuing a strategy aimed at diversifying its revenue streams. One of the most significant moves in this direction was the $28 billion acquisition of Splunk, a cybersecurity firm, which was finalized in March. This purchase is expected to boost Cisco’s subscription-based services, reducing its dependence on one-time hardware sales, which have been increasingly susceptible to market volatility.
Cisco’s major shift towards AI is a key part of its long-term strategy. In May, the company reiterated its ambitious goal of achieving $1 billion in AI-related product orders by 2025. This target is supported by a $1 billion fund launched in June, aimed at investing in AI startups such as Cohere, Mistral AI, and Scale AI. Over the past few years, Cisco has made over 20 AI-focused acquisitions and investments, highlighting its commitment to integrating AI into its product offerings.
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Over 126,000 employees have been laid off across 393 tech companies since the start of the year, according to data from tracking website Layoffs.fyi. That surely reflects their need to cut costs to balance huge investments in AI, analytics and related technologies.
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References:
https://www.cisco.com/c/en/us/products/index.html#~products-by-technology
Cisco to Implement Second Round of Layoffs Amidst Strategic Shift to AI and Cybersecurity
Worldwide Enterprise Network Spending Follows Roller Coaster Trajectory
Cisco restructuring plan will result in ~4100 layoffs; focus on security and cloud based products
Dell’Oro: Campus Ethernet Switch Revenues dropped 23% YoY in 1Q-2024
Worldwide Campus Ethernet Switch [1.] revenues plummeted by 23% YoY in the 1st quarter of 2024 to a 2-year low, according to the Dell’Oro Group.
- The only two vendors that grew campus switch revenues year over year were Santa Clara, CA based Arista Networks and Ubiquiti [2.].
- Cisco’s campus switch revenues fell more than the worldwide average.
Note 1. With higher demand from new use cases for wired connectivity such as automation, analytics, and network visibility, and the need for new access switches to aggregate Wireless LAN access points, Dell’Oro Group is offering in-depth analysis specifically on Ethernet Switches built and optimized for deployment outside the data center, for the purpose of connecting users and things to the corporate Local Area Network (LAN).
“Basically, campus switches are really the networking gear to connect users and devices and laptops,” said Sameh Boujelbene, VP with Dell’Oro Group. “Access points are probably the number one application.”
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Note 2. Although headquartered in New York, NY, Ubiquiti wrote in a 2019 SEC filing:
“We use contract manufacturers, primarily located in China, Vietnam and Taiwan, to manufacture our products. Our relationships with contract manufacturers allow us to conserve working capital, reduce manufacturing costs and minimize delivery lead times while maintaining high product quality and the ability to scale quickly to handle increased order volume. Over the long term, our contract manufacturers are not required to manufacture our products for any specific period or in any specific quantity. If necessary, we expect that it would take approximately 3 to 6 months to transition manufacturing, quality assurance and shipping services to new providers.”
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“Vendor backlogs of campus switch orders have now been completely run down, and the market is in a multi-quarter digestion cycle,” said Siân Morgan, Research Director at Dell’Oro Group. “The shipments of most port speeds declined, and the Average Sales Price (ASP) also dropped on a YoY basis.
“However, in 1Q 2024, Arista had its third sequential quarter of (market) share gain, growing Campus Switch sales to large enterprises.
On the downside, Cisco’s Campus Switch shipments contracted sharply. This reduction contrasts with their shipments in 2023, when Cisco opened the “floodgate” for Catalyst and Meraki port shipments which had been on backorder,” added Morgan.
Additional highlights from the 1Q 2024 Ethernet Switch – Campus Report:
- The contraction in campus switch sales was broad-based across all regions, with the exception of Central America-Latin America (CALA).
- Some vendors bucked the price trend and were able to grow port ASPs thanks to richer product mixes.
- 5/5.0 Gbps switch ports are expected to return to growth as shipments of Wi-Fi 7 Access Points accelerate.
The Dell’Oro Group Ethernet Switch – Campus Quarterly Report offers a detailed view of Ethernet switches built and optimized for deployment outside the data center, to connect users and things to the Local Area Networks. The report contains in-depth market and vendor-level information on manufacturers’ revenue, ports shipped and average selling prices for both Modular and Fixed, and Fixed Managed and Unmanaged Ethernet Switches (100 Mbps, 1/2.5/5/10/25/40/50/100/400 Gbps), Power-over-Ethernet, plus regional breakouts as well as split by customer size (Enterprise vs. SMB) and vertical segments.
To purchase these reports, email [email protected]
References:
Campus Ethernet Switch Revenues Crash to a Two-Year Low in 1Q 2024, According to Dell’Oro Group
Dell’Oro: Optical Transport, Mobile Core Network & Cable CPE shipments all declined in 1Q-2024
Dell’Oro: Broadband network equipment spending to drop again in 2024 to ~$16.5 B
Telco and IT vendors pursue AI integrated cloud native solutions, while Nokia sells point products
The move to AI and cloud native is accelerating amongst network equipment and IT vendors which have announced highly integrated smart cloud solutions designed to migrate their telco customers into a new and profitable cloud future. The Cloud Native Computing Foundation (CNCF), as the name suggests, is a vendor-neutral consortium dedicated to making cloud native ubiquitous. The group defines cloud native as a collection of “technologies [that] empower organizations to build and run scalable applications in modern, dynamic environments such as public, private and hybrid clouds. Containers, service meshes, microservices, immutable infrastructure and declarative APIs exemplify this approach.”
CNCF writes that the cloud native approach “enable[s] loosely coupled systems that are resilient, manageable and observable. Combined with robust automation, they allow engineers to make high-impact changes frequently and predictably with minimal toll.”
In particular, Ericsson, HPE/Juniper, Cisco, Huawei, ZTE, IBM, and Dell have all announced telco end to end solutions that provide a platform for new services and applications by integrating AI, automation, orchestration and APIs over cloud-native based infrastructure. Let’s look at each of those capabilities:
- AI (Artificial Intelligence): Leveraging AI capabilities allows telcos to automate processes, optimize network performance, and enhance customer experiences. By analyzing vast amounts of data, AI-driven insights enable better decision-making and predictive maintenance.
- Automation: Automation streamlines operations, reduces manual intervention, and accelerates service delivery. Whether it’s provisioning new network resources, managing security protocols, or handling routine tasks, automation plays a pivotal role in modern telco infrastructure.
- Orchestration: Orchestration refers to coordinating and managing various network functions and services. It ensures seamless interactions between different components, such as virtualized network functions (VNFs) and physical infrastructure. By orchestrating these elements, telcos achieve agility and flexibility.
- APIs (Application Programming Interfaces): APIs facilitate communication between different software components. In the telco context, APIs enable interoperability, allowing third-party applications to interact with telco services. This openness encourages innovation and the development of new applications.
- Cloud-Native Infrastructure: Moving away from traditional monolithic architectures, cloud-native infrastructure embraces microservices, containerization, and scalability. Telcos are adopting cloud-native principles to build resilient, efficient, and adaptable networks.
While each company has its unique approach, the overarching goal is to empower telcos to deliver cutting-edge services, enhance network performance, and stay competitive in an ever-evolving industry. These advancements pave the way for exciting possibilities in the telecommunications landscape. When fully integrated, these technologies will enable the creation of smart cloud networks that can run themselves without human involvement and do so less expensively — but also more efficiently, responsively and securely than anything that exists today.
Our esteemed UK colleague Stephen M Saunders, MBE (Member of the Order of the British Empire– more below) notes that Nokia is not embracing smart cloud telco solutions, but is instead focusing on individual products. Last October, the company announced strategic and operational changes to its business model and divided the company into four business units. At that time, Nokia’s President and CEO Pekka Lundmark said:
“We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. However, while the timing of the market recovery is uncertain, we are not standing still but taking decisive action on three levels: strategic, operational and cost. First, we are accelerating our strategy execution by giving business groups more operational autonomy. Second, we are streamlining our operating model by embedding sales teams into the business groups and third, we are resetting our cost-base to protect profitability. I believe these actions will make us stronger and deliver significant value for our shareholders.”
Steve says Nokia’s new divide-and-conquer strategy is being reinforced at its sales meetings, according to an attendee at one such gathering this year, with sales reps being urged to laser-focus on selling point products.
“The telco capex situation at the moment means Nokia — and others — have no choice but to examine every aspect of their business to work out how to adjust for a future CSP market that is itself going through dramatic change,” said Jeremiah Caron, global head of research and analysis at market research firm GlobalData Technology.
Most telcos are increasingly adopting cloud-native technologies to meet the demands of 5G SA core networks and to better automate their services.. However, some telcos are hesitant to fully embrace cloud-native due to concerns about complexity, cost, and reliability. Other challenges of cloud native are: changing the software development life cycle, privacy and security, guaranteeing end to end latency, and cloud vendor lock-in due to a lack of standards (every cloud vendor has their own proprietary APIs and network access configurations.
References:
https://www.silverliningsinfo.com/multi-cloud/report-smart-cloud-and-coming-paradigm-shift
https://www.fiercewireless.com/5g/op-ed-whither-nokia
Building and Operating a Cloud Native 5G SA Core Network
Omdia and Ericsson on telco transitioning to cloud native network functions (CNFs) and 5G SA core networks
https://www.ericsson.com/en/ran/intelligent-ran-automation/intelligent-automation-platform
https://www.huaweicloud.com/intl/en-us/solution/telecom/cloud-native-development-platform.html
https://sdnfv.zte.com.cn/en/solutions/VNF/5G-core-network/cloud-native
https://www.ibm.com/products/cloud-pak-for-network-automation
https://www.dell.com/en-us/dt/industry/telecom/index.htm#tab0=0
Steve Saunders (a.k.a. Silverlinings‘ Sky Captain), is a British-born communications analyst, investor, and digital media entrepreneur. In 2018 he was awarded an MBE in the Queen’s Birthday Honours List for services to the telecommunications industry and business.
Verizon transports 1.2 terabytes per second of data across a single wavelength
Verizon has upgraded its optical to electrical conversion cards to send data at speeds of 1.2 Tbps on a single wavelength through the carrier’s live production network. The trials demonstrated increased reliability and overall capacity as well, Verizon said.
The trials, which were conducted in metro Long Island, N.Y., were in partnership with Cisco and included technology from Acacia, as well. They utilized Cisco’s NCS 1014 transceiver shelf and Acacia’s Coherent Interconnect Module (CIM 8). Verizon said the module features silicon semiconductor chips with 5nm complementary metal-oxide semiconductor (CMOS) digital processing and 140 Gbaud silicon photonics using 3D packaging technology. In short, digital processing capabilities and transistor density both are increased.
Verizon said that it transmitted a 1.0 Tbps single wavelength through the Cisco NCS 20000 line system for more than 205 km. It traversed 14 fiber central offices (COs). The carrier said this is significant because progressive filtering and signal-to-noise degradation impact wavelengths as they pass through each CO. The trials also featured 800 Gbps transmission for 305 km through 20 COs — and a 1.2 Tbps wavelength that traversed three offices.
“We have bet big on fiber. Not only does it provide an award-winning broadband experience for consumers and enterprises, it also serves as the backbone of our wireless network. As we continue to see customers using more data in more varied ways, it is critical we continue to stay ahead of our customers’ demands by using the resources we have most efficiently,” said Adam Koeppe, SVP of Technology Planning at Verizon.
Image courtesy of Verizon
In addition to increasing data rates, the new optics technology from Cisco reduces the need for regeneration of the light signal (conversion to electrical and back to optical signals) along the path by compensating for the degradation of the light signal traveling through the fiber cable. This adds reliability and leads to a reduced cost per bit operating expense for more efficient network management.
Bill Gartner, senior vice president and general manager of Cisco Optical Systems and Optics, added, “This trial demonstrates our commitment to continuous innovation aimed at increasing wavelength capacity and reducing costs. The Verizon infrastructure built with the Cisco NCS 2000 open line system supports multiple generations of optics, thus protecting investments as technology evolves.”
In March, Windstream Wholesale said that it sent a 1 Tbps wave across its Converged Optical Network (ICON) between Dallas and Tulsa, a distance of 541 km.
References:
https://www.verizon.com/about/news/verizon-fiber-technology-advancement-results
Verizon Touts 1.2 Tbps Wavelengths Over Production Network – Telecompetitor
https://www.verizon.com/about/news/verizon-transports-800-gbps
AT&T, Verizon and Comcast all lost fixed broadband subscribers in 2Q-2023
Wipro and Cisco Launch Managed Private 5G Network-as-a-Service Solution
Wipro has announced a managed private 5G-as-a-Service solution in partnership with Cisco. The new offering enables enterprise customers to achieve better business outcomes through the seamless integration of private 5G with their existing LAN/WAN/Cloud infrastructure.
Managed private 5G from Cisco and Wipro supports organizations looking to enjoy the advantages of a private 5G network without having to acquire, run, and maintain one. The as-a-service solution benefits enterprise customers by minimizing the risks associated with upfront capital expenditure (Capex) investments and expedites technology adoption as Wipro and Cisco take on the technical, operational, and commercial risks of implementing the solution.
“Private 5G is already enabling connectivity for a wide range of use cases in factories, supply chains, university and enterprise campuses, entertainment venues, hospitals, and more,” said Masum Mir, Senior Vice President and General Manager, Provider Mobility, Cisco Networking. “We’ve created a simplified and intuitive private 5G solution with Wipro, leveraging the advantages of 5G, IoT, Edge and Wi-Fi6 technologies to improve customer outcomes.”
The managed private 5G solution is built on Cisco’s 4G/5G mobile core technology and Internet of Things (IoT) portfolio – spanning IoT sensors and gateways, device management software, as well as monitoring tools and dashboards. The solution is seamlessly built, run, and managed by Wipro for customers. To support the partnership, Wipro has created a dedicated private 5G lab to build, test, and demonstrate industry use-cases.
“Wipro and Cisco have a long history of building secure networks for enterprises and industries,” said Jo Debecker, Global Head of Wipro FullStride Cloud. “We are both dedicated to the partnership and delivering a secure, cloud-managed private 5G service to our customers. Because it is an as-a-service solution, it provides maximum benefits while minimizing the human resources and costs associated with owning a private network.”
Lourdes Charles, Vice President, 5G / Connectivity Services, Wipro Limited said, “Private 5G integration will put organizations on the cusp of a new revolution. We are delighted to expand our long-standing strategic relationship between Cisco and Wipro to include managed private 5G solutions for enterprise customers. To simplify the customer experience, the solution will validate mission-critical use cases, operations Service-Level Agreements, and lifecycle management. Wipro is fully committed through our 5G Def-i platform, to assist customers with their private 5G networks through best-in-class technology, pricing, and performance.”
“Wipro believes Cisco is very well positioned with extensive products and services to provide the complete stack for enterprise-converged network and security solutions,” the firm noted in an email to SDxCentral. “Cisco also brings integration with enterprise infrastructure and applications.”
IoT Analytics recently ranked Cisco as one of the market’s top software providers, touting its Cisco Edge Intelligence and IoT security offerings. The analyst firm also noted that spending on IoT software hit $53 billion in 2022, with the installed base of connected IoT devices surging to 14.4 billion units. The firm expects that device number to surge to 30 billion units by 2027.
Wipro says that 5G cellular network for enterprise running on both licenses and shared spectrum lays the foundation for:
ABI Research this week reported that more than 1,000 enterprise private networks have been deployed worldwide, despite a slowdown in public proclamations.
“This is actually a good sign for the private networks market,” Leo Gergs, senior analyst for 5G Markets at ABI Research, wrote. “Enterprises are beginning to see the deployment of private cellular connectivity as a competitive advantage and, therefore, do not want to talk about it too openly. Which is important as the market moves from the experimental phase toward commercializing private network deployments.”
Gergs added that this growth has now placed more pressure on the telecommunications industry to ensure those networks can handle increasingly complex and revenue-generating use cases. “The telco industry urgently needs to deliver on promises made to the enterprise community now. Otherwise, enterprise 5G will enter the history books as the technology that always overpromised and under-delivered.”
United Kingdom-based managed service provider Logicalis recently deployed Cisco’s private network with Logicalis overseeing the on-site engineering, including site preparation, ordering of solution components, organization of the spectrum, SIM management, staging, creation of customer profiles and core and RAN installation.
Chris Calvert, VP of private wireless services for Logicalis US, explained that Cisco is providing its Private 5G platform, which includes the 4G/5G core network that Logicalis’s 4G LTE and 5G service requires. That core is available as a single standalone (SA) core or a high-availability three-server cluster.
“Cisco really wanted this to be a managed services-only solution,” Calvert said. “Basically, Logicalis is Cisco’s customer. The combination of the industry expertise and the fact that we have a large managed-services practice were really the driving forces behind Cisco selecting Logicalis as one of only two manufacturers that can actually provide this solution currently.”
About Wipro Limited:
Wipro Limited is a leading technology services and consulting company focused on building innovative solutions that address clients’ most complex digital transformation needs. Leveraging our holistic portfolio of capabilities in consulting, design, engineering, and operations, we help clients realize their boldest ambitions and build future-ready, sustainable businesses. With over 250,000 employees and business partners across 66 countries, we deliver on the promise of helping our customers, colleagues, and communities thrive in an ever-changing world. For additional information, visit us at www.wipro.com.
About Cisco:
Cisco offers an industry-leading portfolio of technology innovations. With networking, security, collaboration, cloud management, and more, we help to securely connect industries and communities. Information about Cisco’s products is here.
References:
Cisco’s Private 5G story: https://www.youtube.com/watch?v=kdsyhsXicNk
