We recently compiled a list of the 10 Best 5G Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Arista Networks, Inc. (NYSE:ANET) stands against the other 5G stocks.
5G, or fifth-generation wireless technology, is the latest evolution in mobile networks, which is designed to significantly improve speed, reduce latency, and enhance the capacity and connectivity of mobile devices. A Market Research Future report estimates that in 2024, the 5G market is projected to be worth $15.03 billion, and by 2032, it could reach $229.41 billion. This rapid increase represents a compound annual growth rate (CAGR) of 40.60% during the forecast period. According to some experts, 5G is one of the most important trends in technology along with artificial intelligence (AI).
5G and AI Could be Catalysts of Global Digital Transformation
In a CNBC interview at the Mobile World Congress Shanghai on June 26, director-general of the GSM Association, Mats Granryd highlighted the deep connection between 5G and AI and suggested that their mutual rise is not accidental. He said that “AI feeds off 5G and 5G feeds off AI.” This is especially evident in China, where the development of standalone 5G networks is well advanced and discussions are already shifting toward 5G Advanced (5.5G). While some countries lag, like the Philippines, Mats pointed out that this dynamic between 5G and AI is most prominent in regions with widespread 5G coverage.
When asked about the rivalry between countries like the U.S. and China in AI and 5G, Mats said that such competition is insignificant. He said that from his experience on the GSMA board, which represents the 25 largest mobile operators globally, the focus is on creating common standards and specifications rather than competing.
He talked about the difficulties of the 2G and 3G eras when different technologies created challenges for global connectivity. The shift to a unified 4G standard was a pivotal moment that laid the foundation for the digital economy.
Mats believes that 5G will follow a similar path to become a common platform worldwide, which will also extend to AI. While some regions may advance faster than others initially, he showed confidence in the fact that everyone will eventually catch up and benefit from the integration of AI with 5G.
Our Methodology
For this article, we used stock screeners and ETFs to identify companies involved in the 5G market. We then selected 10 stocks with the smallest short interest and listed them in descending order of their short interest. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician in a server room managing a large-scale network of computers.
Arista Networks, Inc. (NYSE:ANET)
Short Interest as % of Shares Outstanding: 0.66%
Number of Hedge Fund Holders: 65
Arista Networks, Inc. (NYSE:ANET) is a prominent provider of cloud networking solutions and focuses on high-performance Ethernet switches and software tailored for extensive data centers and campus settings. The company is also a significant contributor to the 5G ecosystem, as it offers essential infrastructure that facilitates the deployment and functioning of 5G networks.
It provides high-speed networking platforms to leading telecom operators like SK Telecom, who use the company’s technology to develop resilient and scalable data center networks that can manage the increased data traffic associated with 5G services.
Among the company’s offerings designed for 5G networks and infrastructure are the Ethernet Universal Spine and Leaf Network Switches, the Extensible Operating System which streamlines network operations and ensures a uniform operational model across different platforms, the multi-domain management platform Arista CloudVision, and 5G Edge Solutions, among others. It tops our list of the best 5G stocks to buy according to short sellers.
Arista Networks (NYSE:ANET) stands to gain significantly from the ongoing expansion of 5G technology and the growing reliance on cloud services. As a key player in networking infrastructure, the company is benefiting from several industry trends, including the increasing number of data centers and the rise in internet-connected devices. This positions it favorably in the market, especially with its recent advancements tailored for AI applications.
The company’s new 7060X6 Etherlink AI networking platform is a great example as it is designed specifically to handle intensive artificial intelligence workloads. This platform facilitates the connection of multiple computer-processing units, which addresses a major challenge in the AI industry related to data processing. The company’s expertise in data center technology, particularly for AI, strengthens its role in the expanding AI data center market.
In its latest earnings report for Q2, the company achieved a revenue increase of 15.9% and a remarkable 29.5% rise in adjusted operating profits, surpassing market expectations. In light of the strong performance, on July 31, Jefferies analyst George Notter raised the price target on Arista Networks (NYSE:ANET) to $380 from $340 and kept a Buy rating. Notter’s optimism is supported by the company’s continued success in securing major AI and cloud networking trials. The company has won four out of five significant trials, with the potential for a fifth, possibly with Microsoft Corporation (NASDAQ:MSFT), as per the firm. This development suggests it could replace some of the existing InfiniBand solutions at Microsoft.
The company has set its revenue guidance for the upcoming quarter between $1.72 billion and $1.75 billion. This forecast represents an approximate 17% increase compared to the previous year, which signifies its growing presence in the AI hardware sector and its potential for continued success in the evolving tech landscape.
Arista Networks (NYSE:ANET) was part of 65 funds’ portfolios and the total stake value was $1.9 billion in the second quarter. As of Q2, Polar Capital is the top shareholder in the company and has a position worth $287.162 million.
Artisan Partners stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“Notable trims in the quarter included Chipotle and Arista Networks, Inc. (NYSE:ANET). Arista Networks is the market leader in cloud networking equipment used in data centers. Shares have experienced strong outperformance since the beginning of 2023 due to its ethernet options being well positioned to capture market share in AI cloud environments (more scalable and cheaper than InfiniBand, an out-of-the-box solution by Nvidia). Similar to Chipotle, after a period of strong performance, we trimmed the position based on valuation and market cap.”
Overall ANET ranks 1st in our list of the best 5G stocks to buy according to short sellers. While we acknowledge the potential of ANET as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
