Cisco Drops 9% and Holds the Dow Back While the Nasdaq Climbs. Common Denominator: Memory Chips.

Rising memory chip costs squeezed Cisco's gross margins, sending the stock lower and costing the Dow about 68 points.

Micron Technology gained 5.1% and SanDisk surged 13.5% following an ambitious investor day presentation.

July producer prices came in unchanged for the month, with core PPI up 0.2%.

Record revenue, record earnings, $4 billion in AI orders, and the stock fell 9%. Cisco Systems (NASDAQ: CSCO) had quite a morning.

The result is a split morning session on Wall Street. The Nasdaq Composite (NASDAQINDEX: ^IXIC) index gained 0.53% as of 12:32 p.m. ET and the S&P 500 (SNPINDEX: ^GSPC) is up by 0.41%, while the Dow Jones Industrial Average (DJINDICES: ^DJI) is down 0.17%. All three looked much better two hours earlier, peaking around 10:30 a.m. ET with the Nasdaq flirting with a 1% jump.

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Let's start with Cisco. The network gear veteran fell 9.3% despite reporting record fourth-quarter revenue of $17.3 billion, up 18% year over year, and record adjusted earnings of $1.22 per share. The company also saw roughly $4 billion in quarterly AI orders from hyperscale customers. But Cisco's gross margins shrank due to soaring memory costs and a less lucrative hardware sales mix. As a result, Cisco subtracted about 68 points from the Dow and roughly $41 billion in market value.

You've heard the "expensive memory chips" story before, and those chipmakers benefit from Cisco's margin issues. SK Hynix (NASDAQ: SKHY) rose 7.8%, adding about $95 billion in market value and 0.17 percentage points to the Nasdaq Composite, the largest single contribution to that index. On top of Cisco's market signals, the Korean government is spending billions on the local chip-making infrastructure, sending both Hynix and Samsung (OTC: SSNLF) stocks skyward today.