Cisco Challenges Broadcom with New P200 Chip Adopted by Microsoft and Alibaba

TradingKey - On October 8, Cisco Systems (CSCO.US) introduced the P200, a new network chip tailored for long-distance AI data center connections, with Microsoft and Alibaba's cloud computing divisions already on board as customers.

Cisco announced on Wednesday that the Silicon One P200 chip will serve as the core of the next-generation routing system, the Cisco 8223, designed to meet the high-speed interconnect demands across AI era data centers. It is intended for connecting vast data centers spread out for AI system training.

Martin Lund, Cisco's Vice President, explained that due to the extensive nature of AI training tasks, operations span across multiple data centers, which are often dispersed and can be as far as 1,000 miles apart. The dispersed nature is driven by the high electricity demands of data centers, with AI companies establishing them wherever power supply is abundant. Companies like Oracle and OpenAI have data centers in Texas, while Meta has set up in Louisiana to tap into billions of watts of power.

This scenario calls for high-speed interconnections among data centers. Broadcom preempted Cisco by releasing a similar product, unveiling the latest version of its Jericho network chip in August, claiming it can transmit larger volumes of data and is ideal for inter-data center operations.

Analysts suggest that Cisco's release of this product may intensify competition with Broadcom. Lund acknowledged Broadcom as the acknowledged leader in this sector but asserted that Cisco also boasts a comprehensive product line that rivals Broadcom's. According to Reuters, Microsoft's and Alibaba's cloud computing divisions have already become P200 customers.

Moreover, the Cisco P200 chip is reprogrammable, allowing for continuous upgrades without hardware replacement. It also features robust buffering capabilities, storing incoming data during activity surges to prevent information loss—a critical aspect considering the chip's operating costs.

Cisco shares closed up 1.95% on Wednesday and continued their upward trend in pre-market trading on Thursday, rising 0.11% to $70.41.