Shares of Arista Networks Inc. and Nvidia Corp. were falling in after-hours trading on Wednesday after Facebook parent Meta Platforms Inc. delivered a lower initial outlook for 2024 capital expenditures than analysts had been expecting.
Arista's Stock Declines
Arista’s stock was down more than 6% following Meta's announcement. The drop reflects concerns over Arista's revenue since Meta accounted for 26% of Arista’s revenue last year.
Nvidia Stocks Also Affected
Nvidia's stock was also impacted by the news, falling more than 1%. Although a direct correlation between Meta's 2024 capex guide and Nvidia is difficult to determine, Meta's plans for AI Research SuperCluster (AI RSC) build-out should be noted.
Meta's Capital Spending Outlook
Meta announced that they expect $30 billion to $35 billion in capital spending next year. This growth will be driven by investments in servers, including both non-artificial intelligence (AI) and AI hardware, and data centers. It is worth mentioning that these investments align with Meta's new data center architecture previously announced last year.
However, the midpoint of Meta's capital spending outlook fell below the $33.8 billion FactSet consensus. Alongside downward revisions for 2023 capital expenditures, the company now anticipates $27 billion to $29 billion expenditure, compared to the previous outlook of $27 billion to $30 billion.
Wells Fargo’s Aaron Rakers expressed his thoughts on the situation, noting the importance of Meta's AI RSC build-out. He highlighted Meta's plans for two additional 32k+ GPU clusters, one on InfiniBand and the other on Ethernet.
As investors closely monitor Arista's future, Meta's capex outlook remains a key focus due to its significant impact on Arista's revenue performance.