Chipmakers are far from the only big gainers as artificial intelligence-related demand booms, and Wall Street analysts are expecting strong tailwinds for one networking stock: Arista Networks. Arista provides the infrastructure to support big data AI requirements. Stocks were on fire in 2023, soaring more than 25%. On Thursday, the stock was up 8%. ANET YTD Mountain Arista Networks shares in 2023. Key to the analysts’ thesis is the expectation of booming demand as hyperscalers and large-cap tech companies build out their infrastructure to tolerate higher bandwidths. GPU workloads that support many large language models and generative AI typically require higher capacity. “With a greater exposure to hyperscalers than the competition and a history of delivering high-performance networking gear, Arista is in a prime position to capitalize on AI-driven demand,” wrote James Fish, analyst at Piper Sandler, in a note to clients in April. The need for large data lakes to store, process and backup large amounts of data should benefit Arista in the long run, Needham said in a recent statement. The company believes that the tailwinds of AI will add 5% to 10% to the company’s long-term growth. Needham also sees Arista’s well-established relationships with hyperscalers like Meta Platforms and Microsoft as another benefit that will benefit the stock as those companies develop new AI-focused technologies. The need to handle heavier AI workloads could push the total addressable cloud networking market to $24 billion by 2027 and see the market grow at a 16% compound annual growth rate over the next four years, according to Meta Marshall by Morgan Stanley. “ANET is the biggest beneficiary of our coverage given presence with several hyperscaler customers, and we estimate that their cloud opportunity TAM could accelerate 600 basis points to 21% if they were to capitalize on a similar opportunity on AI workloads, like they’ve traditionally had.” the analyst wrote in a March note. Evercore ISI’s Amit Daryanani included Arista in the company’s list of tactical outperformers, stating that going forward, investor focus is likely to shift to AI and workload expectations He estimated the network company’s AI potential at more than $2 billion — CNBC’s Michael Bloom contributed coverage.
