Jim Cramer Doubles Down on This $252B AI Stock: “You Have to Buy” Every Dip

Phil, a caller from North Carolina, told Jim Cramer on the September 10 broadcast of Mad Money that he and his granddaughter, Antonia, each bought shares of Arista Networks (NYSE:ANET | ANET Price Prediction) after watching Cramer’s interview with CEO Jayshree Ullal.

Antonia, a recent college graduate working in Manhattan, had, as Phil put it, fallen in love with her portfolio. Her question, relayed through her grandfather, cut straight to her concern about the current infrastructure boom: Can this kind of company eventually fall apart the way earlier networking and telecom highfliers did?

Cramer endorsed Arista Networks because he believes in the company’s CEO. Arista closed Friday’s trading session at $199.59, up 5.91% on the session after climbing 52.32% year-to-date.

Cramer Says Arista CEO “Is Money”

Cramer’s bull case was almost entirely about the company’s CEO: “My confidence is with Jayshree Ullal. I think she’s amazing,” he said. “Every time the stock has dipped, if you’ve noticed it since her tenure began, you have to buy it. And I’m not backing away from that.”

“She is money, and the company’s fantastic.”

Arista stock is up 51.91% year to date and 807.56% over five years. This is a bet on CEO Ullal as an operator and on her judgment of product cycles, hyperscaler relationships, and supply.

At 38x Forward Earnings, Arista Isn’t Cheap

Arista has a market capitalization of roughly $252 billion, trading at roughly 38x forward earnings. The most recent quarter, reported August 4, delivered $3.04 billion in revenue, up 37.7% year over year, with a non-GAAP operating margin of 49.9%. Management raised full-year guidance to approximately $12.6 billion, which it described as 40% annual growth.

Analyst coverage skews almost entirely bullish with 8 strong buys and 23 buys, with zero holds and zero sells. That kind of unanimity is obviously a signal of confidence, but it leaves little room for error if there’s a meaningful disappointment.

That said, Ullal herself warned on the last call that “the industry is going to have a two-year problem” on supply, and purchase commitments have swelled to about $9.7 billion. Ullal has also said she “fully expect[s] there to be one, maybe two, 10% customers,” a reminder that a very short list of buyers still drives the company’s sales.

What Investors Are Getting With Arista

Cramer’s confidence in Arista ultimately comes down to execution. Ullal has navigated multiple technology cycles exceptionally well, while the company is still growing revenue around 40% annually with enormous operating margins.

But at roughly 38 times forward earnings and a $252 billion valuation, investors are betting that exceptional growth and execution continue long enough to justify a valuation that leaves little room for disappointment.

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