Meta Platforms Just Caused This Crucial Artificial Intelligence (AI) Stock to Plummet. Should You Buy the Dip?
When one or two customers contribute a lot of revenue to a single business, it can be problematic. The supplier must maintain great relationships and maybe even give some concessions to these large clients; otherwise, the business might suffer.This is what happened just last week with Meta Platforms (NASDAQ: META) and Arista Networks (NYSE: ANET). Meta, formerly Arista's biggest customer, pulled back on its spending in 2024. This news caused investors to sell the stock off hard, and it now sits around 25% below its all-time highs. That's a massive reaction, but is it overblown?Arista Networks supplies its clients with data center networking solutions. Basically, any company that needs to send information from one data center to another is a potential client of Arista. While there are many businesses with data centers scattered across the globe, there are few that can match the scale of the various tech giants. As a result, it shouldn't surprise investors that a large chunk of revenue comes from a small client base. This is no different than GPU maker Nvidia (NASDAQ: NVDA), as it has multiple companies that each make up over 10% of its total revenue. Continue reading
When one or two customers contribute a lot of revenue to a single business, it can be problematic. The supplier must maintain great relationships and maybe even give some concessions to these large clients; otherwise, the business might suffer.
This is what happened just last week with Meta Platforms (NASDAQ: META) and Arista Networks (NYSE: ANET). Meta, formerly Arista's biggest customer, pulled back on its spending in 2024. This news caused investors to sell the stock off hard, and it now sits around 25% below its all-time highs. That's a massive reaction, but is it overblown?
Arista Networks supplies its clients with data center networking solutions. Basically, any company that needs to send information from one data center to another is a potential client of Arista. While there are many businesses with data centers scattered across the globe, there are few that can match the scale of the various tech giants. As a result, it shouldn't surprise investors that a large chunk of revenue comes from a small client base. This is no different than GPU maker Nvidia (NASDAQ: NVDA), as it has multiple companies that each make up over 10% of its total revenue.
