Arista Networks and Broadcom ride AI networking boom

The semiconductor market is forecast by World Semiconductor Trade Statistics to grow from $796 billion in 2025 to $1.9 trillion by 2027. This expansion drives demand for faster, smarter networking as AI data centers process ever-growing volumes of data.

Arista Networks sells high-speed Ethernet switching gear and its EOS software. Its revenue growth accelerated from 35% in Q1 to 38% in Q2, and its AI-focused Etherlink switches are now sold to more than 100 clients, up from a handful in 2024. With only about 20% to 22% of the data center switching market, Arista sees room to gain share, and its push into scale-across routing could expand its addressable market by $15 billion to $20 billion through 2030. Despite competition from Cisco and Nvidia, Arista's R&D as a percentage of revenue has fallen from over 20% in 2021 to 13% on a trailing-12-month basis through Q2 2026, yet growth continues.

Broadcom supplies custom AI chips and networking components. In its fiscal third quarter ended Aug. 2, revenue surged 86% year over year to nearly $30 billion, with AI networking revenue growing more than 2.5 times. Broadcom shipped large volumes of Ironwood TPU v7 to Google and Anthropic, began shipping TPU v8i at scale, and delivered OpenAI's first custom chip, Jalapeno, which management says beats Nvidia's Grace Blackwell on AI inference. Its growth depends on a small number of customers, so any slowdown in AI infrastructure build-out could hurt the stock. Still, a modest forward P/E of 19 on fiscal 2027 estimates and expected 41% annualized earnings growth suggest potential upside if the AI spending boom continues.