Cadence-2 Top Tech Stocks to Buy in 2025 for Long-Term AI Growth (CDNS, ANET)

Market Overview - The Nasdaq dropped 1.5% on Friday, sending it back under its 21-day moving average [5] - Long-term investors should focus on the 50-day and 200-day moving averages for the S&P 500, Nasdaq, and favorite stocks as key buying levels [6] - Stocks are expected to experience a recalibration in early 2025 following a massive two-year rally [16] - Corrections and pullbacks are regular events that investors can take advantage of [17] - The next stock market downturn should be bought up quickly given the outlook for earnings growth in 2025 and 2026 [19] Cadence Design Systems (CDNS) - Cadence is projected to grow its revenue by 13% in 2024 and 2025, adding over $1 billion to the top line between FY23 and FY25 [2] - The company's adjusted EPS is expected to grow by 15% and 16% in 2024 and 2025, respectively [2] - Cadence's modeling and computational software are essential for the lifecycle of semiconductors and other vital technologies [8] - Nvidia and other giants depend on Cadence's simulation technology for their cutting-edge semiconductors [10] - Cadence averaged 14% revenue growth over the trailing five years [10] - The company's 2025 and 2026 earnings estimates faded this year, leading to underperformance [10] - Cadence's stock has soared roughly 5,000% in the last 15 years, outperforming the Tech sector and Computer-Software industry [21] - CDNS underperformed the Tech sector and the market in 2024, setting up a potentially attractive entry point for investors in 2025 [22] - Cadence trades at a 25% discount to its highs in P/E terms while Tech is 5% below its peaks [23] - The growing complexity of semiconductors for AI and hyperscale computing has transformed Cadence into an invaluable partner for many chip companies [25] - Cadence was range-bound in 2024, trading 7% below its highs and around its February 2024 levels [26] Arista Networks (ANET) - Arista Networks is a client-to-cloud networking powerhouse, focusing on large AI, data center, campus, and routing environments [3] - The AI revolution is a significant driver for ANET's growth [3] - ANET's networking infrastructure has expanded rapidly over the past decade alongside cloud computing and the big data explosion [3] - Arista Networks trades near its all-time highs in terms of forward earnings, making it due for a recalibration [4] - Any slide down to ANET's 50-day or 200-day moving average would mark a buying opportunity [4] - Arista Networks boasts over 8,000 cloud customers worldwide, including some Magnificent 7 tech companies [11] - Microsoft and Meta are two of ANET's largest clients, with "cloud titans" accounting for 46% of its revenue [11] - Microsoft and Meta rely heavily on Arista Networks for their big data growth and AI dreams [12] - ANET grew its revenue from$ 361 million in 2013 to $5.86 billion last year, averaging 37% sales growth over the past three years [13] - Arista Networks is projected to boost its sales by 19% in FY24 and 17% in 2025 to reach$ 8.15 billion [13] - ANET's price per share became more attainable to many investors after a 4-for-1 stock split in early December [15] - Arista Networks has an impressive balance sheet, with $7.4 billion in cash and equivalents against$ 3.6 billion in total liabilities and zero debt [27] - ANET stock has skyrocketed roughly 2,800% in the past 10 years, outperforming Meta and Microsoft [27] - ANET's Tech-crushing performance includes a 92% run in 2024 [27] - Wall Street views ANET's growing relationship with Microsoft and Meta as a long-term vote of confidence [24] - 13 of the 19 brokerage recommendations for ANET are "Strong Buys" [24] - Arista Networks is projected to grow its adjusted earnings by 26% and 10% in FY24 and FY25, respectively, following 52% EPS expansion in FY23 [24] - ANET has topped quarterly estimates for five years in a row and holds a Zacks Rank 2 (Buy) [24]