Shares of Arista Networks (ANET) are down about 3% at noon on Oct. 13 after Nvidia (NVDA) announced a new push into networking solutions for artificial intelligence (AI) data centers.
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Specifically, Nvidia said that Meta Platforms (META) and Oracle (ORCL) will adopt its Spectrum-X Ethernet networking switches for their AI data centers. Going forward, Meta will integrate Spectrum Ethernet switches into its networking infrastructure for the Facebook Open Switching System (FBOSS), while Oracle plans to build AI supercomputers with Nvidia’s Spectrum-X Ethernet switches.
The announcement has raised concerns about new competition for Arista Networks, which is a major provider of cloud networking solutions and data center switches, sending ANET stock lower. Investors and analysts appear worried that Nvidia’s expanding footprint in the networking space represents a competitive threat to Arista Networks.
New Era
According to Nvidia, the Spectrum-X Ethernet platform enables hyperscalers to efficiently connect millions of processors. Nvidia also claims that its technology has demonstrated record-setting efficiency gains, having achieved 95% data throughput compared to about 60% for other Ethernet networks.
Nvidia CEO Jensen Huang recently said, “Spectrum-X is not just faster Ethernet — it’s the nervous system of the AI factory, enabling hyperscalers to connect millions of GPUs into a single giant computer to train the largest models ever built.”
The market seems to quickly be reassessing Arista Networks’ competitive position as Nvidia expands its AI offerings to now include networking solutions.
Is ANET Stock a Buy?
The stock of Arista Networks has a consensus Strong Buy rating among 20 Wall Street analysts. That rating is based on 17 Buy and three Hold recommendations issued in the last three months. The average ANET price target of $168.12 implies 11.07% upside from current levels.
