Cisco CEO Chuck Robbins wants data centers in space

18:19Nilay Patel:And then Apple and Google get to extract rent from everybody for all their purchases and games. And, like, we have an economy that works that way. The promise of AI is we're going to do it again, right? We're going to move the economy a third time to a next paradigm in computing. What's the evidence you see that that is happening or will happen at the scale necessary to support this investment? Well, if you look at just some of the early agentic platforms, you heard Jensen this week talking about OpenClaw. If you just look at the early promise of what that can do for you, I think you're going to see that it's going to automate a lot.

18:51It's going to make your whole purchasing process different. I just reflect back on 2007 when the iPhone came out. None of us had any clue what we'd be doing with that phone today. None of us. I mean, maybe there's some people somewhere who were such visionaries. They saw it coming. But the application portfolio that we have today is much broader than we ever thought it would be. And I think you're going to see the same thing emerge around AI. We don't know what all is going to come. We have ideas about things that we think will happen, but we don't know everything that's going to happen. And, I mean, this stuff's changing so fast.

19:27You know, I talked to Kevin at OpenAI, and he, Kevin Will, he's like, we'd sit down and have meetings about what are we going to do the next two months. And then three weeks later, we throw it out and start over again because everything's changing. so quickly. And I think that's the way we're going to all have to operate, which is going to be very uncomfortable for a lot of people.

19:42Nilay Patel:Is that changing the way that you're selling your products to build this capacity? Because if you don't know what the capacity is for, it must change how it's being built. Well, it's changing a lot in how we design silicon. These customers are so big that they're a market of one. So we have unique requirements coming from an individual company, which we haven't had to deal with in the past. We built general purpose silicon, we sold it to everybody, and it worked. So you have different applications, different use cases, different customers that are leading us to have to move faster and build more variants of some of this technology than we would have in the past.

20:16Nilay Patel:That's right up against the insatiable demand of other silicon providers, right? There's a capacity crunch for chips. There's a capacity crunch for RAM. How is that working for you? Are you able to get the flexibility you need? When you look at fab capacity, We could use more, but the world could use more. I don't think you get anybody on here who builds chips that wouldn't say, I'd love to have more capacity. Same thing for memory. We're in a crunch for probably 18 months, something like that. We're doing everything we can to try to secure what we need, and we feel pretty good about where we are right now, but we'll see how the demand plays out over the next year and a half.

20:57Nilay Patel:It occurs to me, just talking to people about RAM margins, I've talked to consumer laptop vendors who say there might not be consumer laptops this year. It might just be - Priced out? Priced out. Just to put a stick of memory in a cheap laptop, you might just never be able to cover the cost. We might just be out. I saw the CEO of Razor, which makes gaming laptops with lots of fun lights. He's like week to week, I don't know what the margin on that product will be. You've got to build a big piece of the infrastructure puzzle. The GPU is useless without the networking. This has to equalize somewhere for you at least, right?

21:32Nilay Patel:Where you say, look, this is our margin to build the networking, to get the value out of the GPUs that you're buying at super high rates from NVIDIA and whoever else. Is that working in the market to equalize at least your prices? Networking equipment uses a lot less memory than compute platforms do, obviously. So we have memory in every networking device, but it's a much smaller percentage of the bomb than it would be in a server. That's a bill of materials. Bill of materials. Thank you. Sorry about that. Than it would be in like a server. And yeah, the customers understand. And what I keep trying to explain to them is the price increase are happening upstream from us.

22:08We're just an absorber of the price increase. And we're having to do more frequent price increases than we have. and we're having to change our terms to deal with the same thing that your other guests talked about, which is the dynamic nature of the pricing that we see right now in the memory space. But when you go to the large hyperscalers, I said earlier it's existential. What we've just adopted with them is more of just a transparent model that says, here's what we need, here's how it works, here's our pricing. And they're generally like, they understand.

22:35Nilay Patel:Because there are other choices, especially for what you provide. Everybody's in the same boat. It's not like you're going to go somewhere else and somebody's going to give you memory at, 10 % of the cost of what we're giving it to you for. I mean, everybody's just trying to deal with the capacity crunch right now. We have to pause here for a quick break. We'll be right back.

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27:40Nilay Patel:welcome back i'm talking with cisco ceo chuck robbins about the big decoder questions i think this brings me to the decoder questions because i my next set of questions after this are really how you're handling this sort of interlocking set of complicated puzzle pieces uh tell me how cisco is structured right now how's it how's the company how big is the company and We're 85 ,000 people plus some contractors, and we're structured functionally like most companies. We've got a sales organization. We've got a product organization. The one change that I made about 18 months ago is that I consolidated all of our products under a single leader for the first time that I can remember.

28:18It's a big, complex portfolio, and so we did that. We've got a services organization. It's fairly functional, pretty standard.

28:26Nilay Patel:You've been reducing the size of the company pretty substantially over the past three years, I would say, two, three years. 2024, you had two big rounds of layoffs. You just had some other little layoffs. Most of the time, those are rapid reallocations that we need to do. It's unfortunate, but typically the ones we've done have not been about reducing the total number of headcount. At least up till now, they have not generally been that way. I was just reading some coverage of those changes. There's a lot of, are these AI-related layoffs? Yeah. Is that on your mind that you might be thinking about new kinds of structures, new kinds of engineering structures?

29:00Sam and I were talking about this last week. And let's say that our engineers become twice as productive because of coding, as an example. This year, we'll have five or six products that'll be 100 % written by AI. Next year, we'll probably have 70 % of our code that'll be written by AI. You still have to test it. You still got to go through all that stuff. But let's say you make them twice as productive just for simplicity of math here. Then companies are going to have to decide, am I going to maintain the same pace of innovation with half the people or am I going to double my pace of innovation with the same number of people?

29:30And I think different companies are going to make different decisions and some variant in between. And I think that's where we're going to head. But we've got to see this all come to life. I mean, we're seeing the early successes of coding, but we haven't seen the unintended downside yet that we haven't figured out. We've got 20-year-old code, 30-year-old code that's integrated in systems. It's written in C++ as an example. and my head of product told me we took all these old lines of code, we compressed it to about 20 % of what it was before, converted it to a modern language using AI. And my first response to him was, you better test that like crazy before you put it in a product and put it in a customer environment.

30:08So there's a lot of stuff we're still learning as we go through there.

30:11Nilay Patel:Stay on that for one second, right? Cisco code can't fail. If Cisco fails, something bad happens in an escalating, catastrophic way. How do you think about that risk, right? I mean, this is, I keep joking that I ask everybody the org chart question. I've asked it for five years, and there's like two answers, like we're functional or divisional, and we get through it. And now I think we're on the cusp of seeing some of the weirdest org charts in business history. I manage a team of two people and 500 agents. Meta is about to do one manager to 50 individual contributors all using agents to write code.

30:40Nilay Patel:I don't know how any of that's going to work. You can't take some of those risks, but you're describing the productivity gains that might come with some of those risks. How are you thinking about that? You're right. Our stuff, the whole mental model around our software development versus these models. Kevin Will from OpenAI, he made a comment at our AI summit one, and he said, you guys should be using these models when they're working properly 10 % of the time just to get to use them. And I sat there and I listened to that comment, and it's just a different way of thinking. I mean, granted, they're going to get it to full, but you just go into it recognizing that it's still evolving.

31:18We don't have that luxury. Our stuff has to work. So we'll have to figure this out as we go. But we've seen how dependent the world is on technology functioning properly. And so we'll have to just assess it as we get closer. But I think there's going to be an awful lot of testing that has to get done. But the flip side is we think AI can help us find bugs more quickly. It can help us assess customers' infrastructure to say, hey, you're running these four versions of our software. We've seen a lot of instances where when you're running those four, it's created a problem. Or there's cybersecurity risks in certain parts of the code that AI can help us find.

31:57I mean, there's a lot of upside. So there's a lot of opportunity for AI to help us become more reliable, safer.

32:04Nilay Patel:You've mentioned security several times now. The flip side of we can deploy AI to help us with security is your adversaries or attackers might be able to deploy AI to attack you much more efficiently. And they are. How is that playing out for you? The emulations that you're going to see and the simulations of an email and video and people replicating me and sending it to somebody, it's just going to get crazier. And so we have to be better at using our tools. And I have also been a big proponent of all of the security competitors in the industry sort of laying down our weapons. and we still compete, but in service to our customers, I believe we have to share intelligence real-time much more effectively today to help our customers deal with this because any one of us on our own is going to be less effective than all of us together.

33:01And so that's a big thing we've been pushing. We've been building a lot of capabilities and there's a lot of opportunities to integrate our platforms and our threat intelligence. And if you think about what you can do with models, if you start training on threat intelligence and conditions that led up to threat vulnerabilities, there's an awful lot we can do to get ahead of this, and we need to do that.

33:22Nilay Patel:I think this brings me into the other decoder question that I ask everybody. This is the one that I think it's going to be under pressure for everybody. At the scale of change you're describing here, how do you make decisions? What's your framework? When I actually wrote my thesis when I was going through the process of becoming CEO and the board was assessing the candidates, one of the things I called out in the document was that – and this is 12 years ago, okay, 11 and a half years ago. I said that the industry is moving so rapidly. You're going to have to have team-based strategy. You have to have a lot of people developing strategy because there's no one individual in general.

34:02There's some brilliant minds, so I'm not ruling any human out, but that can actually come up with the exact right strategy every time they're assessing what they need to do. So we spend a lot of time together as a team. We spend anywhere from one to three hours together every Monday. We're off-site together for two to three days every quarter. and the way we make decisions, look, 99 % of the decisions get made below me because they're easy or two smart people agree. And when they get to me or any other CEO, they're typically, you know, you're usually assessing two potential bad choices or you got two smart people who completely disagree, which tells you it's complicated.

34:44In general, we just spend a lot of time in transparent discussion and open communication about how we're going to make the decisions. At the end of the day, I own them. And I have this belief that when a decision goes really well, you give everybody else the credit. And when it goes very poorly, it's all on me. And that's how you just have to operate.

35:03Nilay Patel:The decisions question, you are dealing with a vast amount of uncertainty, right? How the global internet will be structured is a vast amount of uncertainty. What the hyperscalers need is they build out new capacity for uncertain workloads. Who knows? We're going to sell a bunch of products to the neoclouds, which have circular financing, and those bills might not get paid, which I want to come to. That is a lot of uncertainty. Whether or not all of this infrastructure investment pays off in GDP growth, I would say is the biggest uncertainty of all. How are you dealing with that? You haven't even gotten to three or four other big ones.

35:41What are they? Well, you've got the geopolitical situation. You've got sovereignty requirements all around the world emerging. You've got two wars around the world. You've got tariffs. You've got memory costs. You've got all these things we're all trying to navigate. So it's pretty complicated.

35:53Nilay Patel:That is a lot of uncertainty on your decision making. You're saying it all rolls up to you when it goes wrong. Has that affected how you're making choices? You just have to move faster. We had an all hands with our entire company yesterday. We do it once a month. I told him, I said, look, if speed and change, if that makes you uncomfortable, you're going to be uncomfortable. It is a world where companies can get seriously damaged in a very short period of time. And this is what's driving a lot of the investments because there's a big FOMO issue in the C-suite today. CEOs are like, what am I missing?

36:28What's my competitor going to do that I don't know about? And so I think what that leads us to is, you know, we used to say, get 80 % of the information you can, then make the decision, then adjust as you go. And I think that's, maybe it's not 80 anymore, but you're going to have to take that approach and you're going to have to be willing to take risks and you've got to be comfortable being uncomfortable. And if you're not, it's going to be pretty complicated and pretty stressful time.

36:51Nilay Patel:Billions of dollars of capital are being allocated for infrastructure. Does it come up that the products that might pay this off don't exist? Does it come up next to the FOMO? Depends on the customer. If you look at the telcos, the cloud providers, the people whose core business is highly dependent upon products that we – I mean, everybody's is. But, I mean, we will have those conversations with their CEOs and their leadership team. You go to Mobile World Congress as an example. We were just there. Every meeting, the CEO's in from some of those carriers and service providers. So, they care. When you get into the enterprise space, some of them are super technical.

37:32They understand the value of technology, so they want to talk about trends. They want to talk about what do we see other companies doing or what are we doing as an enterprise that they should be thinking about. But usually, if there's something big going on the table, my only positioning with them is if you go with us, you have my personal commitment that we'll throw all the resources we need to make a new successful. And that's usually all they want to know.

37:55Nilay Patel:I feel like there's a split right now in the market. I understand the enterprise use cases for AI. I understand why you'd want to build as fast as you can there, right? Particularly software development, as you described. Like, we can see the benefit. We talk to developers all the time here at The Verge. They're like, our entire jobs are different. Like, the world has changed. The market has cracked open. Something is going to happen there. And then downstream of that, you can see, okay, well, we hired a bunch of engineers to build us business process automation. Now maybe we get way more value out of those engineers.

38:26Nilay Patel:We get way more automation. There's something in the enterprise that's going to happen with that. For sure. It feels like I understand the value. Do you see any consumer applications of that scale beyond just, I'm going to tell the Alexa to buy me shoes and then it's going to – because quite honestly, I don't yet apart from Google search got a lot weirder in the past two years. I don't have any great examples yet. And you're right. You are seeing sort of some horizontal areas in the enterprise that are consistent across almost every company like coding. Customer service is one that everybody's working.

38:58And you start to see some emerging horizontal use cases in legal. And we see a lot of use cases in our people organization, too. And I think those are pretty standard. Everybody's at least aware of those opportunities. People are at different stages on the journey. But, yeah, I'm not the consumer expert by any stretch. We're pure B2B, so that's where I spend all my time.

39:23Nilay Patel:I think this relates to why I started out by asking about data centers in space. And I've heard Sundar Pichai say variations of this idea. Without the big consumer application that everybody understands and sees the benefit, putting the data center in the backyard is becoming an increasingly harder sell. The power requirements, the water requirements, which I know are controversial and often argued about, but just the energy resources requirements of the data centers are making the data centers unpopular. I don't think it's all that. I don't think the environmental argument historically wins in America.

39:59Nilay Patel:Like, I drive a V8 Mustang. I'm going to keep driving that car. We have an EV that's parked right next to it. But those cars are popular for reasons, right? Fast fashion, enormous environmental impact. Yep. People like it. Yep. There's not an AI product for consumers that they like so much that just transcends the objections they can reach for. We're seeing it play out in really weird ways. Like, in bipartisan ways, people are pushing back against the data centers. Are you going to be able to hit your goals if data center construction slows? And is there a way to overcome those goals without the great consumer product?

40:32I think there is. Look, we've been the most innovative country on the planet for a very long time, and that's not going to change. And some of the smartest people in the world are actually trying to solve these problems, and they will. By the way, I think if you give some of those residents the greatest AI tools on their phone that they've ever seen in their lives, they still don't want the data center in their backyard.

40:53Nilay Patel:Really? I don't think they're going to say, oh, this is great. So I'll go ahead and drive my energy costs through the roof and I'll be okay. You know, we saw a little bit of this with 5G. They didn't want radio towers. You remember that whole thing? Oh, I remember. This is that at a much greater scale. But I think we'll figure it out. The 5G comparison is really interesting. I know you just came back from Mobile World Congress where we are going to - 6G now. 6G is coming. AI has the same problem, right? You can't describe what it's for in a way that might overcome the objection. that feels like a fairly unique point for the whole industry to be at, where the next generation of technology is very exciting to a handful of providers.

41:30Nilay Patel:It's the future of your business in real ways. And the applications are harder and harder to describe. You've seen it all. I'm asking this question on that big sweep, right? We're talking about the internet. It was easy to describe what the internet might do for people. I actually disagree with you. I think a lot of people instantly saw what the phone would become, right? There was an excitement there. That's where you got startup founders from, like in that way that you got founders from. This one just seems more nascent to me. How would you place that in your sweep of history? We've seen some unique 5G use cases that have been – like manufacturing has been a great one.

42:04But they're very niche, right? The most prevalent 5G use case is actually backup connectivity for branches, as an example. But you're right. We didn't have the number of use cases. And I think if you asked the CEOs of the telecoms, they would probably say that they're disappointed in the return they got on all the investment around 5G. I think robotics in general could be the real driver of the utilization of 6G once it gets built. But again, it's early days of being defined. It's still typically we've talked about these sort of tech transitions for years and years and years before they come to fruition.

42:41And AI is different, although we did talk about it for a long time, and then all of a sudden it broke loose. But the pace at which it's changing is just unprecedented. So I think we'll have to see on 6G. It's still TBD, but I don't expect that you'll see the same mistakes made from a speed of investment perspective until they become more clear.

43:04Nilay Patel:We're going to take another quick break. We'll be back in just a minute.

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44:26Nilay Patel:Terms and conditions apply. K-pop Demon Hunters, Saja Boys Breakfast Meal, and Huntrix Meal have just dropped at McDonald's. They're calling this a battle for the fans. What do you say to that, Rumi? It's not a battle. So glad the Saja boys could take breakfast and give our meal the rest of the day. It is an honor to share. No, it's our honor. It is our larger honor. No, really. Stop. You can really feel the respect in this battle. Pick a meal to pick a side. And participate in McDonald's while supplies last.

45:03Nilay Patel:Welcome back. I'm talking with Cisco CEO Chuck Robbins about the data center needs of the AI era and whether or not consumers will buy into having all those data centers built across the country. The internet also was hand in hand with globalization. We both have iPhones that are made all over the world. And you had this giant global network. Maybe this is going to lead to an age of prosperity. Maybe this is going to lead to an age of extreme labor displacement. You can read that however you want. There's a lot of opinions about what the internet and particularly global manufacturing, globalized manufacturing led to.

45:38Nilay Patel:That's all being undone. You can see that every single day that's being undone, whether that's tariffs in an effort to bring manufacturing back to the United States, which we talked about on the show with many of your peers, or whether it's, hey, we're going to put up big walls on the internet. Australia is going to have a social media ban for teens. They've got to enforce that somehow. That's probably going to happen in the network layer. You have the European Union saying the data has to be here. We have to put the data here. European data has to be in Europe. You build the networks. I'm imagining all of this is just one more layer of complication, even as you describe, okay, we should have global systems that bring us to an era of shared prosperity.

46:15Nilay Patel:How are you dealing with that? What you're seeing play out is not only do countries, and it's not limited to Europe at this point, not only do they want They want to have data sovereignty. They want to have sovereign control over any technology they're using. They don't want the U.S. to have the ability to impede the use of that product under any conditions. As an example, some of the meeting platforms like WebEx or Zoom, et cetera, those things. They don't want any other country, and I'll say the U.S., but any other country to have the ability to cut off their access to use these platforms if they were going to invest and use them for critical reasons inside their countries.

46:55In many cases, they would prefer to have, let's use Europe as an example, European companies that build the technology that they use in their infrastructure. In many cases, they don't have that capacity at scale. And so then they have to go default to, who are the companies that I trust? And trust becomes such a big, we talk, it's a big discussion, obviously, around AI. But it is really a big deal. And so for us, as an example, every country we operate in, we have always tried to be good citizens, good members of the community. We've had education programs where we've been training on digital skills around the world for 25 years, 30 years.

47:37Last year alone, we trained over – we had 5 million learners go through one of these programs around the world. And so that trust element is going to become very important. The technology is one thing. You have to build technology that can be deployed the way they want it to be deployed. and then that you have to have a very high degree of trust.

47:54Nilay Patel:Is this changing how you're architecting some of your products? It is. What are some specifics? Well, you know, you'd love if you have a cloud solution. Historically, what you would do, and a lot of companies were built this way, you build global instances and you partition it and you sell it off to different customers. If you go to Germany, as an example, in Germany says, I want to have my version of that running in my country. It's architecturally different than how you might have designed it to begin with. So we're now designing a lot of those control systems or those cloud-oriented systems so that they can be structured in a way where they can run in a country alone and we don't think about building global instances anymore.

48:31Nilay Patel:This is like a very different way of building the internet, right? Like it just isn't the thing. Like my first experience with the internet was watching the coffee pot at the University of England, right? Like this was the promise when I was like a kid watching like a one frame a minute live stream of a coffee pot. Being like, I can go there. And now we're like, oh, we're, this thing happens. You watch live streams of coffee pots for real. Do you remember this? Like 1994, this is like the first video feed on the internet was a coffee pot in Cambridge. Oh, yeah, yeah, okay. And it's like blew my mind.

48:59Yeah, yeah.

49:00Nilay Patel:This is like, in some ways, it's more than ever, right? You can watch live streams of all the coffee pots ever if you want to. And in some ways, this is just closing down, right? Every country is saying our citizens are here. We're going to manage what they do. Their lives are on the Internet. We are going to control the Internet in our country. And that's happening all over the place in all kinds of different ways. It's honestly happening state to state. Like the Internet in California looks different than the Internet in Texas today. You're the networking provider for many of these countries, for many of these companies.

49:28Nilay Patel:When you think about the sweep of what the Internet might look like, when you think about the amount of compute that's happening in a data center as opposed to happening locally on my laptop, right, which is always a kind of dance. What does the internet in the next five years look like to you? Well, it's going to be more fragmented for sure. I think you are going to see lots of – you're seeing the cloud providers build in regions in certain places, and they're having to re-architect to think about this. For most of the functionality that we use the internet for today, I'm not sure it's going to change much, to be honest.

49:58There are going to be controls that are going to exist, but I don't think it's going to change the core normal operating functionality of how it works today. They'll be there in the case of an issue or an emergency. Now, where you store data and all those kinds of things, that's not the network's issue. So how that plays out is independent of what we would think about. But I think you get in times of crisis, and that's when you might see things happen differently. If you're a certain country and you get into a conflict and you want to isolate yourself from a communications perspective so that you can trust that your communication is clear, then maybe that creates short-term dynamics for your citizens.

50:39But I don't think on a normal day-to-day basis it's going to be that meaningfully different.

50:42Nilay Patel:I mean, we're seeing that right now. Like, India shuts off the internet and cashware all the time. The Iranian internet is, like, on and off every day. Like, are those things that your customers are coming to you and saying, one level up, the government wants this capability of the network? Can you help us build it? They are having those conversations around primarily not wanting to have a third party or another country disintermediate their capabilities through tech. by having some control lever or kill switch or something of that nature. That's typically what they're talking about. How does that play into AI a bit, right?

51:12Nilay Patel:Like now we have these workloads built on networks that you're supplying and you've got a bunch of agents doing stuff all day long and you're saying we're going to be the security provider for it. At some point, does Donald Trump get to say, turn off the agents, it's getting out of control? Well, I think you have to think about security at an agent level like you do at an employee level but on steroids. Yeah. It's going to be 5 to 10x more security that you'll need to apply. Maybe more. I'm just throwing numbers out. But I think we have to figure that out as we get going. But it's certainly going to introduce an entry point for bad actors to do things that you certainly wouldn't want them to be able to do.

51:51And we're learning and everybody's working on this problem simultaneously right now.

51:56Nilay Patel:I feel like for most of this conversation, my assumption has been this is going to keep going. This is going to keep working and the problems will be complicated. And everyone will work diligently and we'll solve them. And someone will invent the consumer product and all of this will pay off. What if it doesn't? What if this bubble pops? What does that look like for you? There'll be lost, misplaced capital. There'll be companies that'll shut their doors. And then there'll be the winners will emerge and we'll build out a scale just like we saw the first wave. I would suspect that's what will happen.

52:26I think there's certainly going to be companies that are going to cease to exist. They're going to go away. That's what happens on any of these early things. You take a risk. That's why the reward's so high. It's risk-reward. And so it's just the nature of these massive transitions. And this is bigger than probably – it's bigger and faster than anything we've ever seen.

52:45Nilay Patel:The amount of capital tied up in what you might call circular financing with some of these neoclouds, that seems dangerous to me. It seems like if I had to point it where things will get shaky first, it will be, well, we did a lot of forward investment, a lot of debt investment into neoclouds against workloads that themselves have not yet paid off. Eventually, all the way, the bill comes due, right? Or the investments don't happen. Is that a risk that's on your mind? It is, but not particularly for us. We're super conservative.

53:19I've heard instances where we've looked at some of the financials and have chosen not to do business with some of these folks. And I think every company's got to make their own decisions. We also have creative financing solutions that protect us that we can work through, but we learned a lot in 2000.

53:38Nilay Patel:The name Neoclouds, are you in them or are you staying away from them? No, we're in some of them. Some of them want to use us. A lot of them want partnerships with us, honestly, because they want the enterprise access. And they don't have a robust enterprise sales force, and they think that we can help them there. And so, in many cases, we work together to figure that out. The other way I can see things maybe not get shaky but change dramatically in the way that changes the sort of investment valence of the AI industry is if inference becomes more valuable than training. So far, all the emphasis has been we've got to run these GPUs red hot to do training because the next version of the model will finally be capable enough to, I don't know, be your girlfriend.

54:19Nilay Patel:Like whatever it is that they think they're going to do. Something about training has been the point. We're going to build AGI. They don't want to say it, but they're saying it all the time. There's a chance that the models are good enough and it's actually just inference now. We're just going to run agents and cloud code is big enough to actually effectively affect enterprise cost dynamics. Does that change your business if we're done with training and actually inference is the point? No, it actually is great. Yeah? I don't think you're going to be done with training, by the way. I think it's going to be additive.

54:49I think the inferencing stuff is going to be additive.

54:51Nilay Patel:Do you need all the new data center build out if it's the inferencing instead of the training? Well, I mean, we would like to participate and we'd like to see that continue to grow, obviously, because it's good for our business. But the inferencing side and some people believe that that's going to be bigger. A lot of enterprise customers are going to want to do the inferencing at a point of interaction with a customer and have an immediate value that they're garnering in that interaction with that customer. And that's going to be very distributed. And so distributed compute requires high performance networks, which is good for us.

55:21So we like that.

55:22Nilay Patel:Yeah, this is what I was mentioning. The dynamic between the edge and the data center seems to always be changing. I think I saw some press releases out of NVIDIA's GTC about more compute coming to the edge of certain big network providers. Are you seeing that play out where we don't know where it's supposed to be, so everyone's investing in both the edge and the data center? It's still early at the edge. I think everybody believes they're going to need it. And we're seeing certain applications where you're starting to see people pilot it. And I think this may be a good opportunity for the telecom providers.

55:55There's always been this thesis that edge compute was going to be a big benefit for them.

55:59Nilay Patel:That was the thesis of 5G. I won't say the name. It was part of it, yeah. I went to a very long dinner with one of the major telecom providers, and they told me all about self-driving cars powered by edge networks. You could see this become something. There's discussions now of inferencing grids and dynamic routing of these inferencing requests based on everything from cost of power at a given time of day to capacity that's available. I mean, there's a lot of thinking about how this plays out. And I think it's still TBD, but it's coming. So I want to just bring this all back around. The business here is building data centers with people, right, with big customers.

56:41It's part of it. We also connect all the employees and everything else, too.

56:44Nilay Patel:Sure. I mean, do you want me to talk about WebEx for another hour? Because I have a lot of notes about WebEx. We can talk about anything you want. Apple uses WebEx. Does Tim Cook ever say, dude, can you just make the Mac client a little bit better? No, it's actually better than most others. Do you use it? I mean, I'm a journalist. I'm on calls with all these companies a lot of times. So WebEx comes up in my life. Okay, good. Well, I'm glad to hear that. I think I'm just telling you, find the person, the native. I'm going to get one of my guys to get on the phone with you and make sure that... We got to do it on the show and we'll just go through a demo together.

57:12Nilay Patel:Okay. You got to be there. I got to be there? Yeah. All right. We'll live do notes on a WebEx call. For you to be happy with WebEx, I'll do that. Every time an enterprise software CEO comes on the show, I'm like, do you use your product? And I would say it's a 50-50. I do. All day long. You obviously do. All day long. But I was also a coder early in my life, so I'm a little weird. All right. I've used cloud code, so I'm, you know... You're in it. Yeah. Yeah. But I would say the growth of the business, the explosive growth that everyone's seeing is in AI, right? It's in building these new generation data centers, this new generation of compute.

57:44Nilay Patel:The problem, and I just keep circling around to it, is the people don't want those data centers near them. And I have yet to see the argument for why that should happen. In my mind, the argument is great consumer products, right? If you're like, that's where Netflix comes from, I think people will calm down. But that's not the argument we're making right now. There isn't a product like Netflix. That's where Netflix comes from. I think if you're like Netflix is building a data center in town, people are like, that rules. It's going to be faster. Right. Is Tom Cruise going to be there? Something there would be – you would have some emotional connection to the thing that's happening.

58:19Nilay Patel:We don't have that right now. The pressure on not building these data centers is only going to go up in weird ways. I think in Alabama, there's a state center that proposed blocking solar buildouts as a way to reduce data center interest in his state. Like, that's a weird outcome. What happens if we can't build more data centers? What happens if the public just doesn't buy in? We'll build them in space faster, I guess. I mean, this is why I started saying, are you just trying to escape the political problems of Earth? I don't think they're political problems. I think they're issues of utility and power and cooling and water and all those things.

58:55I mean, they're all interconnected. But I don't wake up every day and deal with this issue. But the people who do are very smart people. I think the thing that a consumer is going to be okay with is if you go in somewhere and you not only build a data center, but somehow you increase the utility capacity of that community, or you do something positive in that community beyond streaming Netflix faster, I think that's when they'll be okay with it. I don't think their concerns are around it being unsightly or anything like that. I think the issue is the concern over the inflationary pressure that it puts on utilities and the things that they need.

59:33Nilay Patel:I mean, I think one of the other, you know, in my hometown of Racine, Wisconsin, there's supposed to be a Foxconn factory and that never came to pass and now it's going to be a Microsoft data center. Instead of 13 ,000 or 15 ,000 jobs, which is whatever Foxconn promised to that site, there's going to be like a couple thousand. So this is a lot of water, a lot of power, and then not the economic lift that you get. And then maybe the inflation and pressures on power or other utilities. As your customers are building out, are you working with them to reduce those pressures, to find ways to make the data centers more efficient?

1:00:06Well, our role is really around the power consumption of the platforms that we sell them. And that's a massive part of our innovation cycle. Every time we want to deliver higher performance, lower power consumption. And so that's the role that we play in that space.

1:00:20Nilay Patel:Well, Chuck, you've given us a lot of time. What's next for Cisco? What should we be looking at for? Look, it's hard to predict what's going to happen. I mean, we were, as I said earlier, we had a high degree of luck with the optics investments and the silicon investments that we made. We had some smart people who were suggesting that we make them, but they've turned out to be magical for us right now. I think for the next three to five years, we're going to be spending every ounce of our energy on secure connectivity in this agentic era. But, I mean, three years from now, I don't know what we'll need to do because things are changing so quickly.

1:00:52But I think we're as prepared as we can be.

1:00:55Nilay Patel:Well, we're going to have to have you back sooner than three years to see. Whatever you say. I've got to come back and do WebEx with you, apparently. Chuck, thank you so much for being on Decoder, man. Thanks, man. I'd like to thank Chuck Robbins for taking the time to join Decoder. And thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or really anything else at all, drop us a line. You can email us at decoderattheverge.com. We really do read all the emails. Or you can hit me up directly on Threads or Blue Sky. We're also on YouTube.

1:01:20Nilay Patel:You can watch full episodes at DecoderPod. It's the same handle on TikTok and Instagram at DecoderPod. Check those out. They're a lot of fun. If you like Dakota, please share it with your friends and subscribe wherever you get your podcasts. Dakota's a production of The Verge and part of the Vox Community Podcast Network. The show is produced by Kate Cox, Nick Stat, and edited by Ursa Wright. Our editorial director is Kevin McShane. The Dakota music is by Breakmaster Cylinder. We'll see you next time. Ready to transform your career in real time from where you are? Brown University's flexible online master's programs will help expand your business influence and your network in just 16 months.

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