Nvidia and Arista see their stocks drop as Meta capex outlook trails estimates

Shares of Arista Networks Inc. (ANET) and Nvidia Corp. (NVDA) were falling in after-hours trading Wednesday after Facebook parent Meta Platforms Inc. (META) delivered a lower initial outlook for 2024 capital expenditures than analysts had been expecting. Arista's stock was off more than 6% and Nvidia's was off more than 1%. Meta expects $30 billion to $35 billion in capital spending next year, "with growth driven by investments in servers, including both non-artificial intelligence (AI) and AI hardware, and data centers as we ramp up construction on sites with the new data center architecture we announced late last year." The midpoint of that outlook came in below the $33.8 billion FactSet consensus. Meta also now anticipates 2023 capital expenditures of $27 billion to $29 billion, whereas its prior outlook was for $27 billion to $30 billion. "While it's difficult to have a direct NVDA read-thru from Meta's 2024 capex guide, we re-highlight Meta's AI Research SuperCluster (AI RSC) build-out," Wells Fargo's Aaron Rakers wrote in a note to clients. "In mid-September Meta highlighted plans for two add'l 32k+ GPU clusters," one of which would be on InfiniBand and the other on Ethernet. As for Arista, Meta's capex outlook is "a key focus" for investors, as Meta accounted for 26% of Arista's revenue last year, he said.

-Emily Bary

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10-25-23 1758ET

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