Arista Networks Plummets 3.1% Amid AI Infrastructure Volatility – What’s Brewing in the Networking Sector?

Summary
• Arista Networks (ANET) plunges 3.09% to $125.91, trading below its 52-week low of $59.43
• Options activity surges with 54% bearish sentiment, including a $125.00 strike call sweep
• Analysts highlight AI infrastructure spending as a $1.3 trillion catalyst in 2026

Arista Networks faces a sharp intraday decline amid a surge in bearish options activity and mixed sector sentiment. The stock’s 3.09% drop to $125.91 reflects investor caution as the AI infrastructure market navigates valuation pressures and margin compression. With $1.3 trillion in AI spending projected for 2026, the networking sector remains a battleground for dominance, but Arista’s current volatility signals short-term uncertainty.

Bearish Options Sweeps and AI Infrastructure Volatility Drive ANET’s Sharp Decline
Arista Networks’ 3.09% intraday drop to $125.91 is fueled by a surge in bearish options activity, with 54% of recent options trades leaning bearish. A $125.00 strike call sweep and a $115.00 put sweep highlight institutional skepticism. This aligns with broader market concerns over margin compression in AI infrastructure, as Arista’s deferred revenue cushion faces pressure from aggressive pricing by competitors like Nvidia. The stock’s decline also follows a Relative Strength (RS) upgrade to 78, suggesting short-term overbought conditions and a correction in investor sentiment.

Communication Equipment Sector Volatility: NVDA’s 2.16% Drop Reflects AI Infrastructure Uncertainty
The Communication Equipment sector, led by Nvidia (NVDA), mirrors Arista’s volatility. Nvidia’s 2.16% intraday decline underscores sector-wide jitters as AI infrastructure spending shifts from hype to execution. While Arista’s Ethernet-based AI fabrics compete with Nvidia’s Spectrum-X, the sector’s mixed performance highlights the fragility of high-growth narratives. TSMC’s $465 billion U.S. investment in semiconductor manufacturing adds macroeconomic noise, but the sector’s focus remains on margin sustainability and supply chain resilience.

Options and ETF Strategy: Navigating ANET’s Volatility with High-Leverage Puts and Calls
• MACD: -1.016 (bearish divergence), Signal Line: -0.572, Histogram: -0.444 (negative momentum)
• RSI: 48.86 (neutral, approaching oversold)
• Bollinger Bands: Upper $137.82, Middle $129.29, Lower $120.76 (price near lower band)
• 200D MA: $118.02 (below current price)

ANET’s technicals suggest a short-term bearish bias with potential for a rebound near $120.76 support. The stock’s 3.09% drop has created high-leverage options opportunities. Two top picks from the options chain are:

• ANET20260123P115 (Put): Strike $115, Expiry 1/23/26, IV 48.64%, Leverage 178.89%, Delta -0.133, Theta -0.0358, Gamma 0.0213, Turnover $7,035
- High IV and leverage amplify returns if ANET breaks below $115. Theta decay (-0.0358) and gamma (0.0213) suggest strong sensitivity to price drops.
- Payoff Calculation: At 5% downside (ST = $119.61), payoff = max(0, $119.61 - $115) = $4.61 per share. With leverage of 178.89%, this represents a 10.3% return on a $4.61 move.

• ANET20260123C124 (Call): Strike $124, Expiry 1/23/26, IV 51.01%, Leverage 25.50%, Delta 0.568, Theta -0.4847, Gamma 0.0372, Turnover $25,581
- High liquidity (turnover $25,581) and moderate delta (0.568) make this ideal for a rebound trade. Theta decay (-0.4847) and gamma (0.0372) indicate strong time decay but price sensitivity.
- Payoff Calculation: At 5% downside (ST = $119.61), payoff = max(0, $119.61 - $124) = $0. Theta decay (-0.4847) suggests minimal loss if ANET consolidates.

Action: Aggressive bears target ANET20260123P115 for a 5% downside, while bulls consider ANET20260123C124 for a rebound above $124. Watch for a breakdown below $120.76 to confirm bearish momentum.

Backtest Arista Networks Stock Performance
The 3-day win rate for ANET after an intraday plunge of -3% is 60.82%, the 10-day win rate is 68.13%, and the 30-day win rate is 77.19%. The maximum return during the backtest was 15.15% over 59 days, indicating that ANET has a strong tendency to recover from such events.

Arista Networks at Crossroads: AI Infrastructure Catalysts vs. Margin Pressures – What to Watch Now
Arista Networks’ 3.09% drop reflects a tug-of-war between AI infrastructure tailwinds and margin compression risks. While the stock’s 52-week range ($59.43–$164.94) and $4.7 billion deferred revenue cushion suggest long-term resilience, short-term volatility hinges on execution risks. The sector’s mixed performance, led by Nvidia’s 2.16% decline, underscores the fragility of high-growth narratives. Investors should monitor the $120.76 support level and institutional options activity for directional clues. Act now: If ANET breaks below $120.76, ANET20260123P115 offers bearish potential; if it rebounds above $124, ANET20260123C124 could capitalize on a bounce.