Last month, market analysts at Rosenblatt Securities expressed concerns that Nvidia (NVDA) could emerge as a significant competitor in the Ethernet market as a provider of networking equipment, prompting them to downgrade their rating on Arista Networks (ANET) stock to “Sell.”
In its financial report for the first quarter of the 2024 fiscal year, Arista stated that it does not currently view NVDA as a competitor in the Ethernet market.
However, Rosenblatt analysts disagree with this view and assert that the company, known for its artificial intelligence processors, is positioning itself as a major player in the Ethernet market, as indicated by statements made during earnings discussions for the first quarter of 2025.
“Nvidia has started delivering its Spectrum X Ethernet Networking products in the first quarter of 2025. This technology is specifically designed for artificial intelligence applications and, similar to Infiniband, is intended to integrate the network as a core component of artificial intelligence processing frameworks,” they said.
“This approach deviates from traditional network demands and may provide Nvidia with a performance advantage and competitive edge against companies focused on Ethernet networking, such as ANET and Cisco,” they continued.
Analysts also noted that Nvidia’s advanced networking platform, Spectrum-X, designed to improve data center operations for artificial intelligence tasks, is increasingly being adopted by various customers, including a cluster of 100,000 GPUs.
The brokerage firm predicts that this product group will generate billions of dollars in sales over the next year.
Analysts commented, “While ANET may not yet consider Nvidia a competitor, we believe Nvidia is certainly targeting ANET. Given Nvidia’s rapid growth in the artificial intelligence sector, it is plausible that within two to three years, Nvidia’s presence in the Ethernet market could equal or surpass that of ANET. We suggest that ANET’s shares should be valued based on past earnings multiples rather than those associated with artificial intelligence companies.”
Source: investing.com
