The groundswell in artificial intelligence technology is real. But so are the myriad challenges facing this market, from a rise in long-term bond yields and geopolitical turmoil surrounding the Israel-Hamas war to a slew of key upcoming earnings reports. That has highly rated cloud networking and AI play ANET stock trying to get a handle on this challenging environment.
Arista Networks made this month's list of new buys by the best mutual funds. ANET stock was joined by AI powerhouses Nvidia and Meta Platforms. Network industry peer Cisco Systems — which applies machine learning and other AI technologies to remote work, cybersecurity, data centers and more — also made this elite screen.
In a further sign of strength and promise among top AI stocks, Arista, Meta and Nvidia have earned a spot on IBD Leaderboard. Plus, Cisco and ANET stock both rank among the best large caps on the IBD Big Cap 20, while Meta stock makes the IBD 50.
While underlying institutional demand for NVDA, Meta, CSCO and ANET stock remains intact, each of these AI names has felt the impact of the market correction. Arista is working to join Meta stock as the only two of these tech titans to trade above their 50-day moving averages.
Arista, Meta Among AI Stocks On Wall Street's Radar
Upcoming earnings present both hope and uncertainty. Meta reports on Oct. 25, while results for ANET stock are scheduled for Oct. 30. Cisco unveils its next quarterly results on Nov. 15, and Nvidia next reports on Nov. 21.
While earnings growth for Arista has slowed in recent quarters, it remains strong. Over the last three quarters, the company has generated average per-share earnings growth of 62.8%, including a 46% year-over-year gain to $1.58 per share in its most recent second quarter. Wall Street forecasts Q3 earnings at $1.41 a share. For the full year, analysts expect earnings growth of 35% at $6.17 per share.
Sales growth also has slowed but remains strong. In Q2, Arista produced roughly $1.5 billion in revenue, marking a 39% gain over the prior-year quarter. Sales gains ranged from 24% to 57% over the last eight quarters.
Arista's solid performance has earned ANET stock a 98 Composite Rating, tying it with Cisco Networks. The score means both stocks are outpacing 98% of all stocks in terms of key stock-picking factors. Nvidia and Meta both score the highest-possible 99 Composite Rating.
As a leading AI stock, how Meta reports on Wednesday and how the market reacts could impact the outlook for ANET stock. Meta ranks as one of the largest customers for Arista. So does Microsoft, which reports Tuesday.
ANET Stock, Meta Near Buy Points As Earnings Loom
As part of Wall Street's focus on AI stocks like Nvidia and Meta, the rise of generative AI plays into demand for Arista as internet data centers fuel the need for more network bandwidth.
Yet the AI angle doesn't guarantee a renewed run in ANET stock, particularly in the current environment. On Oct. 10, Piper Sandler analyst James Fish downgraded Arista from overweight to neutral on concerns about slower enterprise technology spending.
After giving back gains from a neighbor base entry of 178.36, ANET stock now is testing support at its 50-day line. A cup-with handle-base offering a 198.46 buy point remains intact.
As the Nasdaq tries to close above the 13,000 mark, Arista, Meta and Nvdia stock all perked up Monday.
ANET stock currently trades 5% below its buy point as it looks to start the week above the 50-day line. Meta stock has claimed its 21-day exponential moving average, putting it 4% below a 326.20 entry. Nvidia stock remains below its 50-day benchmark as it continues to fabricate a 502.66 buy point.
But the market correction and looming earnings for Meta and ANET stock call for caution in making new buys. Even if the market were to turn around and Meta and Arista popped, establishing and adding to a position gradually remains the lower-risk approach for investors.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
