Shares in Arista Networks fell on Thursday after Nvidia disclosed that it has nabbed Meta Platforms and Alphabet's Google as new customers for Ethernet networking gear in data centers.
Nvidia, which reported first-quarter earnings on Wednesday, told Wall Street analysts on a conference call that it has added Meta and Google as new customers for its "Spectrum-X" Ethernet network switches.
"The Google announcement is not particularly surprising as they were already using Nvidia InfiniBand switches for networking their Nvidia GPUs," said Evercore ISI analyst Amit Daryanani in a report. "Meta was more surprising because, although they use InfiniBand, we expected them to transition away from Nvidia for Ethernet, but it remains to be seen how material of an allocation Spectrum-X is receiving at Meta."
Meta, Google Go With Nvidia
Daryanani added: "We think most of the Spectrum-X revenue in the quarter came from (Elon Musk's) xAI although they reiterated Oracle and Microsoft were also customers. For Arista, the debate will persist given the Spectrum-X commentary although it does not change our positive stance on Arista predicated on the idea that there is plenty of growth to go around."
Amid the emergence of "generative" artificial intelligence, tech giants are building new data centers with clusters of AI computer servers. Those clusters may scale to hundreds or tens of thousands of servers. And those AI server clusters, in turn, are connected with high-bandwidth computer networking technology.
Arista garners most of its revenue from computer switches and routers that work inside data centers and connect racks of servers with long-distance communications networks. It's moving into the market "back-end" networking devices for AI clusters.
Analysts say Nvidia has been able to offer product bundles — Ethernet networking devices packaged with its artificial intelligence accelerator chips. Nvidia is the dominant provider of AI accelerators, also called GPUs.
Arista Stock Sees Growing Competition
"Meta has historically been among Arista's biggest customers along with Microsoft," said Simon Leopold, analyst at Raymond James, in a report. "The market has accepted that backend scale-out will evolve to Ethernet from Infiniband, but we see the ongoing challenge stemming from Nvidia's ability to bundle."
He added: ""We believe Cisco Systems will have an advantage over Arista once it fully integrates its Silicon ONE networking ASICs with Nvidia's software stack."
On the stock market today, Arista stock fell 6.3% to 86.93 in afternoon trading. Nvidia stock gained 3% to near 139 on better-than-expected results, despite losing business in China.
Meanwhile, Arista management has forecast $750 million in AI-related sales for 2025, with a good chunk of that coming from Ethernet networking.
In addition to Nvidia and Cisco, Arista faces competition from startup Nexthop AI. Anshul Sadana, the former chief operating officer of Arista, founded Nexthop AI.
With Thursday's retreat, Arista stock is down about 20% in 2025. Nvidia stock has climbed about 6%.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity, quantum computing and cloud computing.
