We recently published a list of Jim Cramer Latest Lightning Round: Top 10 Stocks to Watch. Since Arista Networks Inc (NYSE:ANET) ranks 4th on the list, it deserves a deeper look.
Jim Cramer in a latest program on CNBC talked about the latest rebound in the market.
“Never get tired of all-time highs. We are experiencing a time for the market which is what I said would happen when the Fed starts cutting rates when the economy is still solid.”
Cramer said that the key reason the market roared to highs was strong earnings from top banks. He said since the Fed’s interest rate cuts have just started, investors believe maybe the “best is yet to come.”
Jim Cramer wondered whether this strong performance trend would be a “pattern” in this earnings season.
“We will find out soon enough. We will see if the positive action will be sustained.”
Cramer recommended investors to “listen to the calls” this earning season and “ponder a moment, and only then should you pull the trigger.”
“We are at the beginning of one of the year’s four reporting periods. Probably the most exciting. I can’t believe I still get fired up, but man, am I ever.”
For this article, we watched the latest episodes of Jim Cramer’s ‘Lightning Round’ segment on CNBC and picked 10 stocks he was talking about. With each company, we have mentioned its hedge fund sentiment. 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).
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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.”
Overall, Arista Networks Inc (NYSE:ANET) ranks 4th on Insider Monkey’s list titled Jim Cramer Latest Lightning Round: Top 10 Stocks to Watch. While we acknowledge the potential of Arista Networks Inc (NYSE:ANET), 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 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.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
