Here's Deep Sail Capital's Views on its Current Position: Arista Networks (ANET)

Deep Sail Capital, an investment management company, released its first-quarter investor letter. A copy of the letter can be downloaded here. Deep Sail Capital Partners returned 0.02% net of fees in the quarter and averaged 80% net long exposure. The fund outperformed benchmarks, the Russell 2000 index and the Russell Mid-Cap Growth index, by 9.5% and 7.1%, respectively. The short portfolio significantly contributed to performance this quarter, particularly as the overall market experienced a decline. Its positive impact surpassed the losses from the long portfolio, even though the average short exposure was only 47%, compared to 128% for the long portfolio. For more information on the fund’s top picks in 2025, please check its top five holdings.

In its first-quarter 2025 investor letter, Deep Sail Capital highlighted stocks such as Arista Networks, Inc. (NYSE:ANET). Arista Networks, Inc. (NYSE:ANET) is a technology company that engages in the development and distribution of data-driven, client-to-cloud networking solutions. The one-month return of Arista Networks Inc (NYSE:ANET) was 19.00%, and its shares gained 16.80% of their value over the last 52 weeks. On May 07, 2025, Arista Networks Inc (NYSE:ANET) stock closed at $86.45 per share with a market capitalization of $108.574 billion.

Deep Sail Capital stated the following regarding Arista Networks Inc (NYSE:ANET) in its Q1 2025 investor letter:

"Arista Networks Inc (NYSE:ANET) is a prominent player in the cloud networking sector, specializing in high performance switching and routing solutions tailored for data centers, campus environments, and AI-driven infrastructures. At the core of Arista Networks is Ethernet, which, as you all probably know, is the standard networking architecture for the internet. But for data centers and AI networking, there are two competing network architectures: Ethernet and InfiniBand (which is Nvidia’s proprietary offering that they acquired through the Mellanox acquisition). Understanding the network architecture landscape is important to understanding where Arista fits into the broader AI landscape.

The company's growth is fueled by the increasing demand for scalable, low-latency networking solutions, particularly as enterprises and cloud providers expand their AI and machine learning capabilities. Arista's emphasis on software-driven networking, automation, and security positions it advantageously. While the CEO of Arista is not created as a founder but rather a founding executive, two of the original founders, Andy Bechtolsheim and Kenneth Duda, are still involved as the chairman/chief architect and CTO, respectively. Due to this, I consider the company founder led..." (Click here to read the full text)

Arista Networks Inc (NYSE:ANET) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 78 hedge fund portfolios held Arista Networks Inc (NYSE:ANET) at the end of the fourth quarter which was 70 in the previous quarter. Arista Networks Inc (NYSE:ANET) achieved a significant milestone in Q1 2025, exceeding $2 billion in revenue for the first time, which reflects a 27.6% year-over-year increase. While we acknowledge the potential of Arista Networks Inc (NYSE:ANET) as an investment, 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 as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered Arista Networks Inc (NYSE:ANET) and shared the list of stocks on Jim Cramer’s radar. Artisan Mid Cap Fund trimmed its position in Arista Networks Inc (NYSE:ANET) in Q1 2025, due to valuation discipline. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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