NVIDIA Corp (NVDA) VS Arista Networks Inc (ANET): Jim Cramer Shares His Opinion

We recently published a list titled Jim Cramer is Recommending These 10 Stocks in June. Since Arista Networks Inc (NYSE:ANET) ranks 5th in the list, it deserves a deeper look.

Jim Cramer in a latest program talked about the effect of inflation on US consumers and discussed how it’s impacting the Haves and the Have Nots. Cramer said while everyone is feeling the “pinch of inflation,” the Have Nots are feeling a “heck of a lot more” than the Haves. Cramer said that the difference between these two classes of consumers is very important for investment portfolios. He complained that many retailers don’t even know their consumers and that’s why they have a totally different reading of the current economic situation and its effects on consumers. Cramer criticized those who aren’t careful about the differences between consumers and use “the consumer” as a blanket term.

Cramer talked about several retail companies and how they are directly feeling the effects of inflation as consumers cut back on spending. The CNBC host said that Americans are making tough choices because of rising prices but we usually don’t talk about it.

Jim Cramer said that many strategists demand several rate cuts because “they want stocks higher.”

“I want higher stock prices too but if we get multiple rate cuts and inflation comes roaring back, it’s the Have Nots that will get hurt.”

Jay Powell Is Worried About Tens of Millions of People With Almost Nothing in the Bank, Cramer Says

Jim Cramer said that while many people won’t be happy to see a strong jobs report (because that decreases the chances of rate cuts), they should keep in mind the tough situation the Federal Reserve is in.

“Jay Powell isn’t worried about those of us with big portfolios. He’s worried about the tens of millions of people with almost nothing in the bank.”

For this article we watched several latest programs of Jim Cramer aired recently and picked 10 stocks he’s bullish about and recommending investors to buy or hold. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Arista Networks Inc (NYSE:ANET)

Number of Hedge Fund Investors: 69

Jim Cramer recently praised Arista Networks Inc (NYSE:ANET) and its Ethernet products in a program and also applauded the company CEO Jayshree Ullal. Cramer said Arista Networks Inc (NYSE:ANET) is an Nvidia partner, and while Jayshree Ullal is not as “all over the place” as Jensen Huang (NVDA CEO), she is an “amazing CEO.” Cramer said that everybody “loves” Arista Networks Inc’s (NYSE:ANET) Ethernet products and the company should get credit for it.

Barclays recently gave bullish comments about the data center switching market which it believes is poised to grow thanks to AI. The firm expects data center switching market to grow 14% in 2024 and 2025, down from prior views of 17% and 13%, respectively, as Ethernet takes a higher share from InfiniBand.

A Barclays analyst said they see “ANET as the stock to own for its networking strength.”

In April, Citi said that Arista Networks Inc (NYSE:ANET) was poised to benefit from a general increase in cloud capital expenditures by big U.S. tech firms.

Giverny Capital Asset Management stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its fourth quarter 2023 investor letter:

“We did a bit of portfolio sculpting during the year, with mixed results. We trimmed Arista Networks, Inc. (NYSE:ANET) several times during the year as it soared. Those trims, a very small one in March at roughly $163 and a larger one in August at $183, don’t look smart with Arista finishing the year at $235 (and up more in January). Arista rose 94% this year. The good news is, Arista finished the year as our second largest holding, at 7.9% of the portfolio.

If you are wondering how I could sell some Arista at $163 but then hold most of it at $235, the answer is that Arista’s outstanding competitive position in Artificial Intelligence became clearer to me as the year progressed. I felt in March that Arista would earn $8 per share in a few years. I see today that it might earn $8 in 2025.

It’s possible there is AI-related froth in the Arista stock price, but also probable that Arista will continue to grow rapidly as the computing centers that process AI queries require enormous amounts of data bandwidth. I believe Arista’s routers and switches are the best tools for routing so-called hyperscale traffic. Also, its operating software allows computer giants to manage the kudzu-like growth of their data centers, lowering their total cost of operation.

The sales of both Arista and Heico reflected my desire to manage PE multiple risk. I keep learning the hard way, however, that trimming your winners generally doesn’t add value. If the valuation is beyond justification, sell the position. If the valuation is high but the business continues to dominate its niche, grow steadily and add value for customers, maybe just take a walk around the block until the urge to sell goes away.”

Overall, Arista Networks Inc (NYSE:ANET) ranks 5th on Insider Monkey’s list of Jim Cramer is Recommending These 10 Stocks in June. You can visit Jim Cramer is Recommending These 10 Stocks in June to see other stocks in the list. While we acknowledge the potential of Arista Networks Inc (NYSE:ANET), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Arista Networks Inc (NYSE:ANET) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.

Disclosure: None. This article is originally published at Insider Monkey.