Investor Alert

Jan. 13, 2022, 7:54 a.m. EST

Longtime Cisco CEO sees three forces moving against tech

By Jon Swartz

The three-headed monster of inflation, COVID and antitrust will dominate the attention of tech executives this year, but the industry remains a prime investment opportunity because of emerging technology, Silicon Valley legend John Chambers predicts.

“Overall, tech is still a great opportunity” to invest, Chambers, the billionaire venture capitalist who was chief executive of Cisco Systems Inc. (NAS:CSCO) for 20 years, told MarketWatch in a wide-ranging phone interview Wednesday. But he doesn’t expect the land rush of initial public offerings that swamped public markets in 2021.

“Last year, a lot of companies went public via IPO and SPAC that shouldn’t have,” Chambers said. “Two-thirds of IPOs closed the year below their IPO price. They went out too early. This year, the market will be more selective about SPACs and IPOs.”

For more: The record-breaking IPO market in 2021 masked some problems under the hood

More than anything, 2022 will be defined by inflation, which will “displace COVID as the top economic issue for U.S. companies across industries,” said Chambers, with long-term impact on salaries, the supply-chain, housing prices and a labor shortage.

Adding to the anxiety and uncertainty is the withering influence of COVID, which will continue to propagate the Great Resignation as individuals chase their entrepreneurial dreams as well as the reimagining of tech workspaces and trade shows. COVID will force large conventions like CES and others to evolve into “blended versions” of in-person and virtual meetings, according to Chambers.

The wild card for 2022 remains antitrust and regulation.

“It is coming,” Chambers said, in part, because Big Tech has strayed from “tech for good.”

“Three to four years ago, the Democrats and the Republicans came out to talk to Silicon Valley leaders and said regulation was coming, and Silicon Valley did not listen,” he said. “Companies were divided. They aren’t used to working together, and often don’t like each other.”

Antitrust in 2022: ‘A year of thousands of tiny tech papercuts’

While executives from Microsoft Corp. (NAS:MSFT) and Apple Inc. (NAS:AAPL) have generally handled relations with Capitol Hill “pretty well,” companies with social media elements such as Google and Facebook haven’t communicated as well, landing them in hotter water, Chambers said.

“They did not build trust and communications, and are Heisman [Trophy] stiff-arming lawmakers” he added.

Underscoring the animus, Sen. Marsha Blackburn (R., Tenn.) recounted the “callous, unconcerned, and lack of awareness” attitudes of Facebook executives who testified on child safety online during two recent Senate hearings.

“The game is up for them,” Blackburn told MarketWatch last week. “I am confident you will see [antitrust] legislation become law this year.”

Chambers does anticipate fertile ground for startups specializing in artificial intelligence, cybersecurity and cloud moving to the edge. “Those areas are where we can expect the next Google (NAS:GOOGL) (NAS:GOOG) , Facebook and Tesla (NAS:TSLA) ,” he said, pointing to the upside of CrowdStrike Holdings Inc. (NAS:CRWD) as the cybersecurity industry heads toward consolidation in his view.

“I’m bullish about AI finally going mainstream after years of hype — bigger than the cloud or the Internet — and being the biggest driving force for digital transformation over the next decade,” Chambers said.

Link to MarketWatch's Slice.