Arista Networks (NYSE:ANET) shares fell more than 8% intra-day today after Rosenblatt downgraded the company from Buy to Sell and reduced their price target from $330 to $210. The analysts noted that while Ethernet remains a long-term winning technology in AI Data Center networking, Arista might not benefit as significantly as previously anticipated, which challenges the justification for its current stock valuation. Despite the general optimism that Arista would greatly benefit if Ethernet technology thrives over Infiniband, the analysts believe that Nvidia might capture the majority of these benefits.
Given that Arista’s stock is trading at 40 times the 2025 earnings per share estimates against growth forecasts in the low to mid-teens, expectations of its role as a major AI beneficiary may be overstated. Furthermore, while Arista is likely to continue expanding its Enterprise market share, this segment generally does not support exceptionally high operating margins or very premium EPS multiples.