Arista Networks Plummets 4.75%: What's Behind the Sudden Selloff?

Summary
• Arista Networks (ANET) trades at $123.75, down 4.75% from its previous close of $129.93
• Sector leader Cisco Systems (CSCO) declines 1.86%, signaling potential sector-wide pressure
• Technical indicators show MACD at -1.02 and RSI at 48.86, hinting at bearish momentum

Arista Networks faces a sharp intraday selloff amid mixed sector dynamics. With the stock trading near its 200-day low of $118.02 and key technical indicators flashing caution, investors are scrambling to decipher the catalyst. The Communication Equipment sector, led by CSCO’s 1.86% drop, appears to amplify the downward pressure. This article dissects the drivers behind the move and outlines actionable strategies for navigating the volatility.

Sector-Wide Tech Volatility and AI Infrastructure Uncertainty
The selloff in ANET aligns with broader Communication Equipment sector weakness, as evidenced by Cisco’s 1.86% decline. While no direct company-specific news triggered the move, sector-wide concerns about AI infrastructure spending cycles and TSMC’s $465 billion U.S. investment announcement—highlighting capital intensity in semiconductor manufacturing—have created a risk-off environment. ANET’s price action below its 30-day moving average ($129.22) and 200-day average ($118.02) suggests short-term bearish momentum, exacerbated by declining volume (4.04M shares) and a negative MACD (-1.02). The stock’s 52-week range of $59.43–$164.94 underscores its susceptibility to macroeconomic shifts in tech spending.

Communication Equipment Sector Under Pressure as CSCO Drags
The Communication Equipment sector faces headwinds as Cisco Systems’ 1.86% decline amplifies bearish sentiment. While ANET’s drop is steeper, the sector’s focus on AI infrastructure and 5G deployment—highlighted in recent Light Reading and Fierce Network reports—reveals structural challenges. TSMC’s $465 billion U.S. investment announcement, though bullish for long-term semiconductor demand, has intensified short-term capital allocation concerns. ANET’s 4.75% drop outpaces CSCO’s decline, suggesting its higher leverage to AI-driven networking demand may be under scrutiny.

Bearish Options Play and Key Technical Levels to Watch
• MACD: -1.016 (bearish divergence)
• RSI: 48.86 (neutral but trending lower)
• Bollinger Bands: Lower band at $120.76 (critical support)
• 200-day MA: $118.02 (potential destination)

ANET’s technical profile favors a short-term bearish bias, with the 200-day MA ($118.02) and lower Bollinger band ($120.76) forming a key support cluster. The stock’s 4.75% drop has already triggered increased activity in out-of-the-money puts, particularly around the $115–$117 strike range. Two options stand out for bearish exposure:

• ANET20260123P115
- Put option, strike $115, expiration 2026-01-23
- IV: 47.72% (moderate volatility)
- Leverage Ratio: 142.26% (high potential return)
- Delta: -0.162 (moderate sensitivity)
- Theta: -0.032 (significant time decay)
- Gamma: 0.025 (responsive to price swings)
- Turnover: 9,036 (liquid)
- Payoff at 5% downside: $1.15 per contract
- This put offers a high leverage ratio and liquidity, ideal for capitalizing on a potential breakdown below $120.76.

• ANET20260123P117
- Put option, strike $117, expiration 2026-01-23
- IV: 44.43% (reasonable volatility)
- Leverage Ratio: 112.52% (strong return potential)
- Delta: -0.207 (higher sensitivity)
- Theta: -0.018 (moderate time decay)
- Gamma: 0.031 (high responsiveness)
- Turnover: 6,243 (liquid)
- Payoff at 5% downside: $3.17 per contract
- This put balances leverage and delta for a more aggressive bearish play, with a 5% downside scenario yielding a 27% return.

Action: Aggressive bears may consider ANET20260123P117 into a breakdown below $120.76, while more conservative traders can target ANET20260123P115 for a safer entry.

Backtest Arista Networks Stock Performance
The backtest of ANET's performance after a -5% intraday plunge from 2022 to now shows favorable results, with the ETF achieving a 60.82% win rate over 3 days, a 68.13% win rate over 10 days, and a 77.19% win rate over 30 days. The average returns over these respective time frames were 1.37% over 3 days, 3.44% over 10 days, and 8.66% over 30 days, with a maximum return of 15.15% on day 59.

Immediate Action: Secure Short-Position Exposure as Sector Weakness Lingers
ANET’s 4.75% drop reflects broader Communication Equipment sector fragility, with Cisco’s 1.86% decline amplifying bearish sentiment. The stock’s technical profile—negative MACD, declining RSI, and proximity to key support levels—suggests further downside risk in the near term. Investors should monitor the 200-day MA ($118.02) and Bollinger lower band ($120.76) as critical thresholds. The ANET20260123P117 put offers a compelling high-leverage play for a 5% downside scenario, while sector leaders like CSCO (-1.86%) provide context for potential follow-through. Watch for a breakdown below $120.76 or a reversal in Cisco’s trajectory.