We recently published a list of Billionaire Stanley Druckenmiller is Buying and Selling These 10 AI Stocks. Since Arista Networks Inc (NYSE:ANET) ranks 8th on the list, it deserves a deeper look.
Stanley Druckenmiller is one of the few billionaires who have been bullish on the AI megatrends right from the start. But that doesn’t mean he’d buy just anything AI the market is buying. After making huge profits from his bullish bet on Jensen Huang’s AI chips empire, he started cashing out of the company in the first quarter and by the end of the June quarter, his stake in the company was left at just over 200,000 shares.
Back in May, Druckenmiller explained why he’s selling the hottest AI stock, saying he’s had a “hell of a run” and he now “just needs a break.”
However, the billionaire said at the time that AI remains underhyped in the long term. Stanley Druckenmiller compared the internet revolution with the current AI boom, saying AI could “rhythm” with the internet and the real payoffs will come 4-5 years from now on. The Duquesne Capital founder, who closed his fund for outside investors and turned it into a family officer in 2011, said that the “incremental payoff” of AI investments is coming by the “day.”
During the second quarter, Druckenmiller shook up his portfolio to buy and sell several famous as well as under-the-radar AI stocks. In this article, we will take a look at some of those.
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Arista Networks Inc (NYSE:ANET)
Billionaire Stanley Druckenmiller’s Stake Value: $18,321,000 (-88% From the First Quarter)
Citi analyst Atif Malik increased his price target on the stock to $385 from $330. The analyst thinks while InfiniBand (a computer networking standard where NVDA has an edge) can take a major chunk of the AI networking market, Ethernet (Arista’s strength) is clearly gaining share. The analyst also said the AI back-end switching total addressable market could reach $15 billion by 2027, up from $10 billion. Based on these catalysts, the analyst increased his earnings estimates for Arista Networks Inc (NYSE:ANET) for 2024, 2025 and 2026 by 4%, 16% and 13%, respectively.
What makes Arista a promising AI stock?
Arista Networks Inc (NYSE:ANET) is set to gain amid the AI-driven shift to high-speed networks due to its open Ethernet design and unified Arista EOS. The company’s partnership with Broadcom also created an opportunity for Arista Networks Inc (NYSE:ANET) to expand its integrated software and hardware solutions.
Arista Networks Inc (NYSE:ANET) claims its Ethernet architecture based on merchant silicon allows fast deployment for major hyperscalers and Tier-2 cloud providers.
During Q1 earnings call, Arista Networks Inc (NYSE:ANET) management said it targets $750 million in AI revenue by 2025.
Ethernet at scale is becoming the de facto network and premier choice for scale-out AI training workloads. A good AI network needs a good data strategy delivered by a highly differentiated EOS and network data lake architecture. We are therefore becoming increasingly constructive about achieving our AI target of 750 million in 2025. In summary, as we continue to set the direction of Arista 2.0 networking, our visibility to new AI and cloud projects is improving, and our enterprise and provider activity continues to progress well.
Read the full earnings call transcript here.
Despite Nvidia’s integrated Ethernet approach with Spectrum-X, Arista Networks Inc (NYSE:ANET) is confident about its scalable AI solutions using Jericho-based platforms, which could drive broader market adoption. Arista Networks Inc (NYSE:ANET) EOS offers a unified interface for various network applications, making it a reliable choice for cloud providers.
Arista Networks Inc (NYSE:ANET) does not see Nvidia as a direct competitor in the Ethernet space yet. Playing on its strengths instead of competing against a giant gives it a strong position in the market.
Madison Mid Cap Fund stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“We trimmed our positions in Arista Networks, Inc. (NYSE:ANET) and Carlisle Companies. Both of these companies have witnessed strong multi-year growth in their stock prices, which have resulted in elevated valuations. While we remain confident in the long-term prospects of both of these businesses, we trimmed our holdings to more appropriate position sizes given the risk/reward offered.”
Overall, Arista Networks Inc (NYSE:ANET) ranks 8th on Insider Monkey’s list titled Billionaire Stanley Druckenmiller is Buying and Selling These 10 AI Stocks. While we acknowledge the potential of Arista Networks Inc (NYSE:ANET), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ANET but 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.
