Arista Networks (NYSE: ANET) stock ended Thursday's trading in the red. The networking technologies company's share price had been up as much as 1.8% early in the day's trading, but it lost ground as the market soured on Nvidia's fourth-quarter earnings report.
Arista stock closed out the day down 5%. Meanwhile, Nvidia's (NASDAQ: NVDA) share price closed out the session down 8.5% despite having been up as much as 2.8% earlier in the session.
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The market's read on Nvidia's Q4 report turned from bullish to bearish today, and the shift had substantial ripple effects on valuations across the broader market. The artificial intelligence (AI) hardware titan actually posted better-than-anticipated results for the period, with earnings per share of $0.89 on sales of $39.33 billion topping Wall Street's call for per-share earnings of $0.84 on revenue of $38.05 billion. Guidance for sales of roughly $43 billion in the current quarter came in well ahead of the consensus estimate for sales of $41.78 billion in the period.
But despite the strong Q4 print and guidance, some investors and analysts questioned whether the business will be able to sustain suitably strong growth momentum and sold out of the stock. The valuation pivot had spillover effects for other growth stocks and dragged Arista lower in the day's trading.
Is Arista stock a buy right now?
Nvidia's Q4 results and guidance actually look pretty good for Arista and suggest that AI infrastructure build-outs will continue at a rapid pace in the near term. There really wasn't anything in Nvidia's earnings release that looks bad for the network-technologies specialist. Instead, the report suggests that Arista will continue to enjoy a favorable demand backdrop.
While there's a risk that the market will broadly shift to assigning lower valuation multiples to AI stocks, Arista has strong positioning in its corner of the market and looks like a worthwhile buy on today's share price pullback.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Arista Networks and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
