Arista Networks down 6% on Nvidia Spectrum-X partnership with Meta Platform 📉

Arista Networks (ANET.US) saw its stock drop by over 6% yesterday following reports that Google Cloud and Meta—one of Arista’s key clients—are opting for NVIDIA’s Spectrum-X Ethernet switches. While this news highlights the fast-evolving nature of the AI networking market, it doesn’t necessarily indicate a lasting threat to Arista’s position.

• NVIDIA is gaining ground in networking, with Spectrum-X annual sales reaching around $8 billion, and the company partnering with Cisco through its SiliconOne platform.
• Nexthop AI, a new startup founded by Arista’s former CFO, has entered the switch market, adding further competition.
• Still, Arista has nearly doubled its market share in AI Ethernet back-end switches, from 6% to 11% in 2024, according to Dell’Oro data.
• Combined, NVIDIA and Cisco could generate ~$2.4 billion in switch-related sales by 2025—compared to $7.5–8 billion for Arista, for whom switches represent its core business.

Meta’s adoption of NVIDIA Ethernet may signal that demand for AI Ethernet infrastructure currently exceeds Arista’s delivery capacity—even if its solutions remain technically superior.

• NVIDIA may benefit from cross-selling—bundling Spectrum-X with GPU contracts to accelerate adoption.

• However, Arista is a pure-play networking firm, with deep-rooted expertise and a strong academic backbone—something NVIDIA is still developing. Meanwhile, Cisco, NVIDIA’s Ethernet partner, faces its own scalability and technical limitations in cutting-edge AI deployments.

• At this stage, unsatisfied demand—not direct competition—appears to be the main driver in the data center networking market. In this context, Big Tech's diversification of suppliers seems natural, and Arista still plays a leading role despite market surprises regarding Meta’s procurement strategy.

Arista grew revenue by nearly 4% quarter-over-quarter and 27% year-over-year in Q1 2025. Second-half results may be even stronger, especially if upcoming tariff discussions ease market concerns.

Chart (ANET.US, H1 interval)

The stock shows signs of oversold conditions, with RSI below 20, and has dipped below the 38.2% Fibonacci retracement of the February downtrend. Still, the stock has rebounded by nearly 35% from April lows, and the current pullback may reflect accelerated profit-taking rather than a structural shift.

ANET shares dipped below EMA200 (the red line) at $92 per share, signalling potential for trend reversal. The $90 zone will be significant resistance for shares price. Today, ANET shares are losing almost 1% in US premarket trading.

Source: xStation5