5. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Investors: 69
Jim Cramer recently praised Arista Networks Inc (NYSE:ANET) and its Ethernet products in a program and also applauded the company CEO Jayshree Ullal. Cramer said Arista Networks Inc (NYSE:ANET) is an Nvidia partner, and while Jayshree Ullal is not as “all over the place” as Jensen Huang (NVDA CEO), she is an “amazing CEO.” Cramer said that everybody “loves” Arista Networks Inc’s (NYSE:ANET) Ethernet products and the company should get credit for it.
Barclays recently gave bullish comments about the data center switching market which it believes is poised to grow thanks to AI. The firm expects data center switching market to grow 14% in 2024 and 2025, down from prior views of 17% and 13%, respectively, as Ethernet takes a higher share from InfiniBand.
A Barclays analyst said they see “ANET as the stock to own for its networking strength.”
In April, Citi said that Arista Networks Inc (NYSE:ANET) was poised to benefit from a general increase in cloud capital expenditures by big U.S. tech firms.
Giverny Capital Asset Management stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its fourth quarter 2023 investor letter:
“We did a bit of portfolio sculpting during the year, with mixed results. We trimmed Arista Networks, Inc. (NYSE:ANET) several times during the year as it soared. Those trims, a very small one in March at roughly $163 and a larger one in August at $183, don’t look smart with Arista finishing the year at $235 (and up more in January). Arista rose 94% this year. The good news is, Arista finished the year as our second largest holding, at 7.9% of the portfolio.
If you are wondering how I could sell some Arista at $163 but then hold most of it at $235, the answer is that Arista’s outstanding competitive position in Artificial Intelligence became clearer to me as the year progressed. I felt in March that Arista would earn $8 per share in a few years. I see today that it might earn $8 in 2025.
It’s possible there is AI-related froth in the Arista stock price, but also probable that Arista will continue to grow rapidly as the computing centers that process AI queries require enormous amounts of data bandwidth. I believe Arista’s routers and switches are the best tools for routing so-called hyperscale traffic. Also, its operating software allows computer giants to manage the kudzu-like growth of their data centers, lowering their total cost of operation.
The sales of both Arista and Heico reflected my desire to manage PE multiple risk. I keep learning the hard way, however, that trimming your winners generally doesn’t add value. If the valuation is beyond justification, sell the position. If the valuation is high but the business continues to dominate its niche, grow steadily and add value for customers, maybe just take a walk around the block until the urge to sell goes away.”