Shares of Arista Networks experienced a significant two-day decline after competitor Nvidia announced major agreements with Meta Platforms and Oracle. The deals involve supplying Nvidia's Spectrum-X Ethernet networking technology for the companies' next-generation artificial intelligence data centers, directly challenging Arista in a critical market segment.
Key Takeaways
- Nvidia secured orders from Meta and Oracle for its Spectrum-X Ethernet networking hardware for AI data centers.
- Arista Networks (ANET) stock fell for two consecutive days following the news, dropping 4.3% on Monday and another 5.8% in Tuesday morning trading.
- Meta has historically been one of Arista's two largest customers, making Nvidia's deal a significant competitive development.
- The agreements underscore the intense competition for dominance in the "back-end" networking market that connects clusters of AI servers.
Nvidia Secures Major AI Infrastructure Wins
Nvidia's announcement on Monday confirmed that both Meta Platforms and Oracle will integrate its Spectrum-X Ethernet networking devices into their AI computing infrastructure. This move signals a strategic victory for Nvidia as it expands its footprint beyond AI accelerator chips into the broader data center ecosystem.
The decision by these two technology giants is particularly impactful for Arista Networks. Meta, the parent company of Facebook, has long been a top customer for Arista's network switches, alongside Microsoft. The adoption of Nvidia's technology by Meta represents a potential shift in a key account.
Furthermore, Oracle was widely considered a significant potential new customer for Arista. Oracle has been aggressively building out its cloud infrastructure to support massive AI workloads, including large-scale agreements with companies like OpenAI.
The Importance of AI Networking
Modern AI data centers rely on thousands of specialized processors, or accelerators, working together. The network that connects these processors is crucial for performance. "Back-end" networks handle the immense data traffic between these AI servers, and their speed and efficiency can be a major bottleneck. Both Arista and Nvidia are competing to provide the high-performance Ethernet solutions required for this task.
Intensifying Competition in Data Center Market
The battle between Arista and Nvidia is centered on the emerging market for high-speed Ethernet technology designed specifically for AI server clusters. Nvidia has a distinct market advantage by bundling its Spectrum-X networking products with its industry-leading AI accelerators, creating a comprehensive and attractive package for cloud providers.
Nvidia also produces InfiniBand, a different high-performance networking technology often used in supercomputers. Its expansion into Ethernet with Spectrum-X puts it in direct competition with established networking companies.
Arista's primary business is selling high-speed computer network switches that form the backbone of modern data centers. Its main rivals include industry veteran Cisco Systems and Hewlett Packard Enterprise, which recently bolstered its networking capabilities by acquiring Juniper Networks.
Arista's Financial Outlook
Despite the recent stock pressure, Arista presented a positive outlook at its analyst day in September. The company projected 20% revenue growth for fiscal 2026, aiming for approximately $10.5 billion, which was slightly ahead of market consensus at the time.
Crucially, Arista predicted its revenue from AI networking would see substantial growth. It forecast this segment to increase by 70% in 2026, reaching around $2.75 billion, up from an estimated $1.5 billion this year. Investors will be closely watching the company's upcoming third-quarter earnings report on November 4 for any updates to this guidance in light of Nvidia's recent wins.
Market Share and Competitors
Arista's main competitors in the data center networking space are:
- Cisco Systems (CSCO): A long-standing leader in enterprise networking.
- Hewlett Packard Enterprise (HPE): Strengthened its position with the acquisition of Juniper Networks.
- Celestica (CLS): A contract manufacturer that also competes in the networking hardware space.
Stock Market Performance and Analysis
The market reaction to Nvidia's announcement was swift. Arista stock (ANET) fell 4.3% on Monday, a day when the broader Nasdaq composite index gained 2.2%. The decline continued into Tuesday, with shares dropping another 5.8% to near $139 in morning trading.
This downturn comes after a period of strong performance for Arista. The stock had gained approximately 33% year-to-date in 2025 and reached a record intraday high of $162.68 on October 10. The recent sell-off has pushed the stock price toward its 10-week and 50-day moving average lines, key technical levels watched by traders.
"According to IBD Stock Checkup, ANET stock holds a best-possible IBD Composite Rating of 99... The best growth stocks have a Composite Rating of 90 or better."
Meanwhile, Nvidia's stock (NVDA) has continued its upward trend, gaining 2.8% on Monday to close at $188.32. Nvidia's shares have risen about 36% so far in 2025, reflecting strong investor confidence in its AI-centric strategy.
Investor Sentiment and Ratings
Prior to the recent news, institutional sentiment toward Arista appeared positive. An analysis by IBD MarketSurge showed an Accumulation/Distribution Rating of B for ANET stock. This rating suggests that institutional investors, such as mutual funds and pension funds, had been actively buying more shares than they were selling.
The upcoming earnings call will be a critical event for Arista. It will provide an opportunity for the company's management to address the competitive landscape and clarify the potential impact of Nvidia's recent successes on its future revenue and customer relationships.