4. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Investors: 65
Talking about the best performers of the third quarter in a latest program on CNBC, Jim Cramer said:
“I just have such a soft spot for Arista Networks. Probably the most unsung of all these winners because it’s a dominant player when it comes to network infrastructure for the cloud, but no one ever sees it. It’s got a lot of business with the data center. I know this is tiresome, but it works. Arista hit an all-time high today. I think it’s got more room to run because this is the dominant player in all sorts of switches, adapters, and networking services that people don’t really care about but are making a lot of money.”
The Information recently reported that Meta Platforms is preparing a cluster of over 100,000 NVIDIA H-100 GPUs to train the latest version of its Llama language model. Evercore ISI believes Arista Networks Inc (NYSE:ANET) is likely to be the networking partner for Meta Platforms’ cluster. Ethernet will handle the networking for the project, as InfiniBand isn’t capable of supporting a cluster of this scale, leading Evercore to believe Arista Networks Inc (NYSE:ANET) will supply some of the infrastructure.
“Assuming GPU’s represent 80% of total spend on this AI cluster, this would imply total cost of around $2.5B, of which 10% is likely spent on infrastructure,” said Evercore analyst Amit Daryanani, in a note. “This could represent a $250M revenue opportunity for Arista, if they won the business.”
Arista Networks Inc (NYSE:ANET) has previously worked with Meta, providing switches for a cluster with 24,000 GPUs. Daryanani noted that their strong relationship makes it likely Arista will supply the switches for this new cluster. If successful, this could boost Arista’s $750 million AI revenue target for 2025. Evercore maintains an Outperform rating on Arista Networks Inc (NYSE:ANET) with a $400 price target.
What makes Arista Networks Inc (NYSE:ANET) 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.
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.”
