Investors are looking beyond chipmakers like Nvidia and cloud leaders like Microsoft to companies like Arista Networks (NYSE: ANET) for AI infrastructure plays. Arista’s stock has surged over 953% in the past five years, driven by its focus on hyperscale cloud deployments and open networking protocols, making it a strong contender in the growing AI market.

Arista Networks (ANET) differentiates itself from Cisco Systems (NASDAQ: CSCO) by offering low-latency switches optimized for hyperscale cloud deployments and a modular operating system compatible with a wider range of open networking protocols. With revenue growing at a compound annual growth rate (CAGR) of 32% from 2020 to 2024, Arista has become a preferred networking hardware provider for cloud giants like Microsoft and Meta Platforms.

Despite facing challenges like competition from white box networking hardware makers and the uneven revenue from higher-speed 800G products, Arista Networks is expected to continue growing. Analysts forecast a CAGR of 22% for revenue and 21% for earnings per share (EPS) from 2024 to 2027, driven by increasing AI workloads, hyperscale cloud deployments, and enterprise campus upgrades. However, the stock’s valuation at 45 times next year’s earnings suggests caution due to potential headwinds from hyperscale orders and competition.

While Arista Networks is positioned for growth in the AI infrastructure market, investors should consider the high valuation and potential risks before investing. The stock is worth considering for long-term growth opportunities, but it may be prudent to diversify investments given the market’s current high valuations. For more investment insights, explore the top 10 stocks recommended by the Motley Fool Stock Advisor analyst team for potential returns in the coming years.

Read more at Nasdaq: Is Arista Networks a Smart Buy for the Next Phase of AI Infrastructure?