Arista Networks Plummets 3.06% Amid AI Bubble Fears and Fibonacci Rejection – What’s Next for the Networking Giant?

Summary
• Arista Networks (ANET) plunges 3.06% intraday to $122.27, testing 38.2% Fibonacci support
• 52-week range of $59.43–$164.94 highlights volatility amid AI-driven growth and sector-wide caution
• Q3 2025 earnings beat revenue estimates, yet market fears of an AI bubble trigger selloff

Arista Networks faces a pivotal moment as its stock tumbles sharply amid growing concerns over an AI bubble, despite strong quarterly results. The pullback tests critical Fibonacci levels and technical indicators, while sector dynamics and product innovation remain key watchpoints for traders and investors.

AI Bubble Fears and Fibonacci Rejection Trigger ANET Selloff
Arista Networks' sharp intraday decline stems from a confluence of macroeconomic and technical factors. The broader market's anxiety over an AI bubble—sparked by recent volatility in tech leaders—has spilled into niche players like ANET, which provides critical infrastructure for AI data centers. Technically, the stock's descent to $122.27 tests the 38.2% Fibonacci retracement level after a failed rebound from the 100-day moving average. This breakdown aligns with a descending channel pattern and a RSI rebound that failed to confirm bullish momentum. While Q3 earnings showed revenue growth and margin strength, the market's focus on AI overvaluation has overshadowed fundamentals, triggering profit-taking and short-covering.

Communication Equipment Sector Under Pressure as CSCO Slides 1.77%
The Communication Equipment sector faces broad-based headwinds, with Cisco Systems (CSCO) declining 1.77% intraday. This sector-wide correction reflects investor caution over AI-driven overbuilding and regulatory scrutiny. Arista Networks' 3.06% drop outpaces CSCO's decline, suggesting heightened sensitivity to AI-specific risks. However, ANET's product innovations—such as AVA agentic AI and VESPA for WLAN mobility—position it to outperform in the long term if the sector stabilizes.

Options Playbook: ANET20251226P117 and ANET20251226C126 Lead the Charge
• 200-day average: $113.84 (below current price)
• RSI: 52.00 (neutral)
• MACD: -2.39 (bearish divergence)
• Bollinger Bands: $118.56–$134.82 (price near lower band)

Technical indicators suggest a short-term bearish bias, with key support at $118.56 and resistance at $134.82. The 200-day average and Fibonacci levels offer critical decision points. While the stock's long-term growth story remains intact, near-term volatility demands a tactical approach.

Top Options Contracts:
• ANET20251226P117 (Put): Strike $117, Expiry 12/26, IV 44.23%, Leverage 87.43%, Delta -0.2517, Theta -0.0092, Gamma 0.0356, Turnover 11,815
- High leverage and moderate delta position this put for gains if ANET breaks below $117. A 5% downside scenario (to $116.16) would yield a $0.84 payoff (max(0, $117 - $116.16)).
• ANET20251226C126 (Call): Strike $126, Expiry 12/26, IV 40.84%, Leverage 64.42%, Delta 0.3529, Theta -0.3250, Gamma 0.0449, Turnover 50,169
- Strong liquidity and moderate delta make this call ideal for a rebound above $126. A 5% upside (to $128.38) would generate a $2.38 payoff (max(0, $128.38 - $126)).

Aggressive bulls may consider ANET20251226C126 into a bounce above $126, while bears should eye ANET20251226P117 if $117 breaks.

Backtest Arista Networks Stock Performance
The iShares Core S&P U.S. ETF (ANET) has demonstrated resilience following a -3% intraday plunge. Over 3 days, the win rate is 62.65%, with an average return of 1.37%. Over 10 days, the win rate increases to 70.18%, with an average return of 3.44%. Over 30 days, the win rate is 79.52%, with an average return of 8.66%. The maximum return during the backtest was 15.15%, indicating that ANET tends to rebound strongly after a sharp drop.

ANET at Crossroads: Fibonacci Support and AI Sentiment Will Dictate Next Move
Arista Networks stands at a critical juncture, with its 3.06% intraday drop testing key Fibonacci levels and technical support. While the stock's long-term growth trajectory remains intact—bolstered by AI infrastructure demand and product innovation—the near-term outlook hinges on resolving AI bubble fears and stabilizing sector sentiment. Traders should monitor the 200-day average ($113.84) and 38.2% Fibonacci level ($118.56) for directional clues. Meanwhile, the Communication Equipment sector leader Cisco Systems (CSCO) dropping 1.77% underscores broader market caution. For now, a tactical approach favoring options like ANET20251226P117 and ANET20251226C126 offers exposure to potential volatility. Watch for a decisive break below $117 or a rebound above $126 to define the next chapter for ANET.