According to a forecast from industry group World Semiconductor Trade Statistics, the value of the semiconductor market is expected to climb from $796 billion in 2025 to $1.9 trillion by 2027. As the volume of processors being deployed continues to grow rapidly, AI data centers will need faster, smarter networking to move all the data they are processing and creating. Because of that, networking equipment suppliers Arista Networks (ANET +1.40%) and Broadcom (AVGO +3.35%) look set up for outsize growth in the years ahead.
The case for Arista Networks
Arista Networks sells high-speed Ethernet switching gear and its Extensible Operating System (EOS) software, which helps move data across data centers at lightning speeds. The company's recent results suggest that its stock offers meaningful wealth-building potential for long-term investors.
In the second quarter, its revenue growth accelerated to 38% year over year, up from a 35% increase in the first quarter. Management also raised its 2026 guidance; it now expects 40% growth for the year.
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Arista's is now selling its AI-focused Etherlink switches to more than 100 clients, up from just a handful in 2024. And with only about 20% to 22% of the data center switching market, the company still has plenty of room to gain share through continued innovation.
Arista is also pushing into scale-across routing -- technology that connects clusters of servers spread across separate data center campuses. That move will expand its addressable market by $15 billion to $20 billion through 2030.
NYSE: ANET
Key Data Points
Of course, its relatively low market share also reflects how competitive this space is, with heavyweights like Cisco and Nvidia vying for position. Even so, Arista's growth has accelerated even as it's easing up on its research and development focus. R&D as a percentage of revenue has fallen from over 20% in 2021 to 13% on a trailing-12-month basis through the second quarter of 2026. The company's continued growth despite its lower R&D-to-revenue ratio indicates a solid competitive position in the market.
Trading at roughly 50 times forward earnings, the stock isn't cheap. But analysts expect earnings to grow at a compound annualized rate of 24% over the long term. The stock has downside risks -- it could suffer if spending on artificial intelligence (AI) infrastructure cools. However, if AI investment continues to rise, Arista's expanding opportunity in data center networking could reward patient shareholders with substantial gains.
The case for Broadcom
Broadcom is a major supplier of custom AI chips and networking solutions for data center infrastructure, though it doesn't compete directly with Arista. Broadcom co-designs custom processors, or XPUs, with leading AI companies. It also supplies networking components, including Ethernet switching silicon, that ultimately power the finished switch products sold by companies like Arista.
NASDAQ: AVGO
Key Data Points
In its fiscal third quarter, which ended Aug. 2, revenue surged 86% year over year to nearly $30 billion. Its AI networking revenue grew more than 2.5 times year over year and should continue to expand alongside its fast-growing XPU business.
Among the custom chips it has collaborated on are Google's Tensor Processing Units.
Broadcom said it shipped large volumes of the Ironwood TPU v7 to Google and Anthropic last quarter, and also began shipping its TPU v8i at scale. It also delivered OpenAI's first custom chip (dubbed "Jalapeno"), which management says beats Nvidia's Grace Blackwell processors on AI inference workloads.
Management now expects full-year AI-related revenue to rise by 186% to $58 billion. Moreover, Broadcom expects its AI revenue to double again in fiscal 2027 to $115 billion, and then again to $230 billion in fiscal 2028.
Long-term agreements, including XPU and networking sales deals with Google, support that outlook. Still, Broadcom's growth will depend on demand from a small number of customers. If anything slows the AI infrastructure build-out (such as regulatory pushback or financing hurdles), the stock could underperform.
Even so, Broadcom's valuation looks too attractive to pass up. If the AI spending boom continues for several more years, the stock's modest forward P/E of 19 on fiscal 2027 estimates leaves room for substantial upside. Analysts expect its earnings to grow at an annualized rate of 41%, aligning with management's aggressive AI revenue targets.
