Goldman Sachs·2025-07-01 02:24Investment Ratings - Arista Networks Inc (ANET): Buy with a 12-month target price of $115 [20] - Cisco Systems, Inc (CSCO): Neutral with a 12-month target price of $67 [21] - Dell Technologies (DELL): Buy with a 12-month target price of $130 [22] - Super Micro Computer Inc (SMCI): Neutral with a 12-month target price of $24 [23] - Hewlett Packard Enterprise Co. (HPE): Not Rated [24] - Juniper Networks (JNPR): Not Rated [25] Core Insights - The AI data center infrastructure market is expected to grow significantly, with AI servers projected to reach $335 billion by 2028, reflecting a 31% CAGR from 2024 to 2028 [4][8] - AI data center switching is anticipated to grow at a 41% CAGR, reaching $22 billion by 2028, with back-end Ethernet growing at a 60% CAGR and front-end Ethernet at a 52% CAGR [3][8] - The overall server industry forecasts remain largely unchanged, with traditional servers facing a decline of 2% CAGR from 2024 to 2028, while AI servers are expected to see robust growth [2][4] Market Share Dynamics - In the AI Networking segment, ANET lost 2 percentage points in back-end AI Ethernet market share, while Nvidia gained 5 percentage points [1] - In front-end AI Ethernet, ANET gained 3 percentage points, reaching 43% market share, while Cisco maintained its share at 11% [1][3] - Within the AI server market, revenue market share shifts were noted, but overall stability in market share for AI server orders is expected [1] Capital Expenditure Trends - Cloud data center equipment capital expenditures are projected to grow at a 19% CAGR from 2024 to 2028, reaching $591 billion by 2028 [7][25] - Total cloud provider capital expenditures are also expected to grow at a 19% CAGR over the same period, reaching $828 billion [7][25] Vertical Market Growth - The AI switching market is expected to grow at a 33% CAGR among hyperscale customers, 45% CAGR at Tier 2 Cloud & Service Providers, and 58% CAGR in the enterprise sector [3][8] - AI server demand is anticipated to be strong across various verticals, with hyperscalers seeing an 18% CAGR, Tier 2 Cloud at 58%, and enterprise at 48% [6][8]