This tech upstart is going after a piece of Nvidia's AI business, says Needham

Needham analyst Ryan Koontz raised Arista Networks' (ANET) price target to $160, citing new product initiatives that position the company to challenge Nvidia in the scale-up network market. Arista plans to develop a scale-up product utilizing Broadcom's Tomahawk Ultra chip, with design completion by 2026 and major trials in 2027, alongside becoming a major supplier to Anthropic in 2025, which is expected to drive significant revenue growth. This bullish outlook comes as ANET shares have surged over 70% in the last six months, with the majority of analysts maintaining a 'buy' rating.

Analysis

Needham's upgrade of Arista Networks (ANET) to a $160 price target is predicated on the company's strategic pivot to compete directly with Nvidia in the high-performance, scale-up networking market for AI infrastructure. This initiative, detailed at Arista's Analyst Day, centers on developing a new product utilizing Broadcom's recently announced Tomahawk Ultra chip, a move that leverages a key supplier relationship to challenge Nvidia's current dominance. The projected timeline, with design completion in 2026 and major trials in 2027, frames this as a medium-to-long-term catalyst. In the nearer term, Arista's business is expected to receive a meaningful revenue contribution in 2025 from a new major supplier agreement with AI firm Anthropic. This dual-horizon growth story is supported by a strong consensus, with 23 of 28 covering analysts rating the stock a buy or strong buy, and comes after the stock has already appreciated nearly 72% in the past six months, significantly outpacing the S&P 500's 17% gain.

Key Decisions for Investors

• Investors should consider Arista Networks as a long-term strategic investment in the AI infrastructure build-out, specifically as a networking pure-play competitor to Nvidia's dominance in scale-up networks.
• It is critical to monitor execution on the new scale-up product roadmap, particularly the 2026 design completion and 2027 trial milestones, as any delays could materially impact the long-term thesis.
• Given the stock's recent 72% surge in six months, investors should weigh the compelling growth narrative, including the 2025 Anthropic revenue catalyst, against a potentially elevated valuation and consider the risk of volatility.