Cisco Systems (NASDAQ:CSCO) stock has popped sharply and moved to a record high as demand for its products jumped. It has soared by 55% this year and 87% in the last 12 months. In contrast, the S&P 500 Index is up 7.7% this year and 26% in the last 12 months. 

Cisco Stock Has Jumped Amid Resilient Demand

Cisco, a top player in the networking industry, has experienced strong demand as the biggest technology companies have boosted their capital expenditure plans as the artificial intelligence (AI) boom continued. 

The most recent Cisco earnings showed that its AI business continued thriving, with orders rising to $5.3 billion. It boosted its AI order guidance from $5 billion to $9 billion.

In total, Cisco's revenue jumped by 12% in Q3 to $15.8 billion, while its earnings-per-share rose by 37% YoY. The company boosted its Q4'26 guidance, with its revenue expected to jump from $16.7 billion to $16.9 billion. 

Cisco's revenue and earnings growth will likely continue rising in the coming years as AI spending gains steam. Also, the revenue will benefit from its strong pricing power.

As a result, analysts were quick to boost their Cisco stock forecasts. For example, HSBC's Stephen Bersey hiked the target from $77 to $130, while Wells Fargo hiked from $95 to $130. Evercore and BNP Paribas hiked their targets to $150 and $132, while Rosenblatt's Mike Genovese boosted to $150.

CSCO Has Become Overbought and Overvalued

Despite the ongoing optimism, Cisco is facing two major risks. Technically, the company has become the most overbought in the S&P 500 Index, with the Relative Strength Index soaring to 88, its highest level in over a decade. 

Historically, highly overbought stocks tend to reverse as investors start booking profits. In Cisco's case, there is also a possibility that the stock will attempt to fill the gap that was created on May 14 when it published its financial results. 

Also, the stock remains much higher than its historical averages, with the 100-day moving average being at $83. This means that the stock may go through mean reversion, where an asset moves back to its historical averages. 

Cisco stock chart | Source: TradingView

The other risk is that Cisco has become relatively overvalued. It now trades with a forward price-to-earnings ratio of 36, higher than the technology sector's median of 31. It is also higher than NVIDIA's (NASDAQ:NVDA) 23 and Micron's (NASDAQ:MU) 12.

This metric is also higher than its five-year average of 20. As such, while the stock has the momentum, there is a likelihood that value-focused investors will start booking profits. The current stock is already higher than the average analyst’s forecast of $105.