NVIDIA has many competitors, both direct and indirect. If you count them carefully, almost half of Silicon Valley is in competition with NVIDIA. However, NVIDIA's competitors in the Ethernet field are rarely mentioned. Despite the rapid development of the newly launched Spectrum-X, the strength of the switch giant Arista cannot be underestimated, especially in their head-to-head competition in 1.6T Ethernet products.
Arista recently announced strong second-quarter results, with a 16% increase in revenue to $1.69 billion, exceeding analysts' expectations of $1.65 billion. Net profit was $665.4 million, up from $491.9 million in the same period last year. Its stock price rose by 3% in after-hours trading, and there is no doubt that Arista is one of NVIDIA's biggest competitors in the Ethernet field.
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However, contrary to what most people think, Arista is a relatively young company in Silicon Valley. Its founder is not an American, but a German. The full name of this German is Andreas Maria Maximilian Freiherr von Mauchenheim genannt Bechtolsheim, commonly known as Andy Bechtolsheim. Born in 1955, he has spent most of his life in the United States but has never tried to obtain American citizenship and has retained his German citizenship.
Bechtolshcim's identity is not just as the founder of Arista. Today's vast server and workstation market is inseparable from him. How did he manage to hold a place in Silicon Valley as a German? Let's take a look.
From Bavaria to Silicon Valley
Bechtolshcim was born in a lakeside town in Bavaria, Germany. His father was a teacher, his mother was a housewife, and he had an older brother, a younger sister, and a younger brother. In such a peaceful family of six, Bechtolsheim showed a strong interest in computers and engineering, often working on various projects in his basement at home.
At the age of 16, Bechtolsheim began to get involved with microprocessors and designed an industrial controller based on the Intel 8008 for a nearby electronics company. Since he could not access assembly language at the time, he programmed it in binary code. Subsequently, for each controller sold by the electronics company, Bechtolsheim received a royalty of 100 marks, and his income soon exceeded that of his father.
From today's perspective, Bechtolsheim is an undeniable prodigy. In a very limited environment, he was able to design an industrial controller on his own without ever being exposed to relevant knowledge. This not only solved the problem of tuition fees but also encouraged him to continue to explore in this industry.In 1974, Bechtolsheim won the national championship in the "Jugend forscht" physics competition with his research on ultrasonic flow measurement. He later said, "At that moment, my life became interesting because the computer equipment at German universities and the entire German computer industry were too outdated for me."
In 1975, not satisfied with the computer environment in Germany, Bechtolsheim went to the United States with a scholarship. He first obtained a master's degree in computer engineering at Carnegie Mellon University, and then entered Stanford University to pursue a Ph.D.
During his time at Stanford, Bechtolsheim participated in many projects, including working as a volunteer consultant at Xerox PARC (Palo Alto Research Center). There, he was exposed to early personal computers and envisioned every scientist having a large-screen personal computer connected to the network. With the support of his mentor, Forrest Baskett, he began to work on this idea.
Bechtolsheim ultimately designed a Unix workstation, which was called Sun-1 (short for Stanford University Network). Although it was not the first workstation to be manufactured, it was the first workstation that could run on an open system, enabling different types of computers to communicate with each other. At that time, existing technologies were all running in proprietary closed systems, while Sun's vision was to bring the company into the network era, which reminds us of John Gage's famous slogan - "The network is the computer."
However, the Sun workstation did not achieve the expected success. Stanford University produced about 10 Sun workstations around 1981-1982, and then Bechtolsheim promoted the design of the workstation to several computer suppliers, but they all rejected this seemingly advanced product.
Just as Bechtolsheim was feeling frustrated, two other Stanford graduates, Vinod Khosla and Scott McNealy, came to him. The three hit it off, and later they brought in Bill Joy, a Berkeley Ph.D. known for designing the Unix operating system.
In February 1982, Sun Microsystems was officially established. Vinod was appointed as the president, Scott served as the manufacturing director, Andy was the vice president of technology, and Bill was responsible for designing the workstation software. Sun became an instant hit in the university market, generating $8 million in sales in the first two quarters of operation.
Sun was ahead of its time in its vision of network computing capabilities and quickly expanded into other vertical fields beyond the university market. The first major success was a partnership with ComputerVision. ComputerVision wanted a new platform to support its software products and had already signed a contract with another supplier until Sun appeared and convinced them that Sun had a better solution. ComputerVision abandoned the previous contract and signed a contract with Sun, indicating that Sun was a strong competitor in the market. Other companies followed suit, most notably financial companies on Wall Street, which became Sun's major customers. Orders poured in, and Sun eventually went public in 1986.
Subsequently, Sun experienced even more rapid development, expanding its product range to include Java, Solaris operating system, ZFS, Network File System (NFS), and SPARC. With the popularization of the Internet, a large number of Internet companies emerged, and the strong demand for servers continuously increased Sun's revenue and stock price. Before the collapse of the Internet bubble in 2000, Sun achieved revenue of $18.3 billion, a stock price of $250 per share, a market value of over $200 billion, and 50,000 employees worldwide, reaching its peak.Sun has also left an indelible mark in the field of technology. The company is renowned for its talent, becoming a training ground for talent in Silicon Valley. Many well-known figures in the tech industry have worked at Sun and later became CEOs of Google, Yahoo, and Motorola. Its most famous software, Java, allows users to write software on any computer and operating system, and it is still running on millions of websites and applications today.
But for Vinod Khosla, Sun was just the starting point.
Entrepreneurship and Re-Entrepreneurship
In 1995, after more than a decade at Sun Microsystems, Vinod Khosla finally left the company he co-founded with a large sum of money to establish Granite Systems. The main purpose of the new company was to develop high-speed network switches. A year after its establishment, the company was acquired by the famous Cisco for $220 million.
After joining, Khosla became the General Manager and Vice President of Cisco's Gigabit Systems Business Unit. He led the team to develop one of Cisco's successful network device series - Catalyst 4500, which successfully helped Cisco lay the foundation in the field of Ethernet switching.
From here, it is not difficult to see that Khosla may be a technology enthusiast, but also an opportunistic businessman.
"I have always been driven by opportunities. We founded Sun around the workstation opportunity (originating from my work at Stanford University)... Later, Sun developed into a server company, which was another great opportunity... In 1995, I saw the opportunity in gigabit networks - so I left Sun to pursue this opportunity. In the end, Cisco acquired me for a huge amount of money." He said this in a media interview.
In early 2001, Khosla co-founded a new company called Kealia with Granite Systems partner and Stanford University professor David Cheriton, dedicated to developing advanced server technology using Advanced Micro Devices' Opteron processors. In December 2003, he left Cisco and officially became the head of Kealia.
But he didn't stay independent for long. In February 2004, Sun Microsystems announced the acquisition of Kealia through a stock swap. Due to this acquisition, Khosla returned to Sun again after ten years, serving as Senior Vice President and Chief Architect. Kealia's server design concept was a supercomputer, but aimed at enterprises, and their basic architecture still exists in Sun's product line, especially the Exadata database cluster.
And after his return to Sun, he didn't stay for long either. In 2005, Khosla co-founded another high-speed network company, Arastra, with Cheriton. Arastra was later renamed Arista Networks. In October 2008, Khosla left Sun Microsystems to serve as Chairman and Chief Development Officer of Arista.At Arista, Bechtolsheim turned his attention to the next wave in the networking field—10 Gb/s Ethernet. Just a year and a half after his official joining, Arista Networks launched its first modular switch, equipped with 384 10 Gb/s ports and a variant of the Linux scalable operating system (EOS) on top, and in March 2011, it introduced a top-of-rack switch based on Broadcom's Trident+ and Fulcrum Microsystems' Bali switch ASIC.
Achieving an advantage in the networking field often means going against the grain. Arista Networks' initial impetus was to use commercial switch chips and focus on developing a more flexible network operating system to attract hyperscale users and cloud builders, while also pushing the wave of bandwidth as much as possible, encouraging commercial chip manufacturers to accelerate innovation and iteration speed. The company made a fortune from the popularization of 10 Gb/s, and performed even better in the popularization of 40 Gb/s and 100 Gb/s. Arista Networks found its profit point, finding a balance between white-box switch suppliers associated with ODMs and large switch OEMs, the latter of which tend to sell products to ordinary enterprises that often do not have the scalability and software flexibility required by hyperscale enterprises, but they also hope to act like hyperscale enterprises and start purchasing infrastructure in a similar way.
Today, Arista is seizing new opportunities in AI with its bet on the Ethernet field. Today's Arista is a major competitor to the larger Cisco in the computer networking industry, yes, the Cisco where Bechtolsheim worked, after a roundabout, the company he founded has become the biggest rival of the old employer. Of course, what is more interesting is that Arista's Chairman and CEO Jayshree Ullal also comes from Cisco, which once triggered a lawsuit between the two parties.
Arista also recently announced strong second-quarter results, with earnings of $2.10 per share after deducting specific costs such as stock-based compensation, far exceeding Wall Street's target of $1.94 per share. Revenue for the quarter grew by 16% to $1.69 billion, exceeding analysts' expectations of $1.65 billion. Net profit was $665.4 million, higher than the same period last year's $491.9 million, and its stock price rose by 3% in after-hours trading.
The company expects third-quarter revenue to be between $1.72 billion and $1.75 billion. The optimistic performance expectations highlight Arista's continuous growth in the networking field, which benefits from the strong demand for powerful new generative AI applications from enterprises, which require fast communication infrastructure to operate, which is exactly what Arista provides.
Arista's Chairman and CEO Jayshree Ullal talked about this demand in a blog post, she said that AI training models are particularly dependent on "lossless, highly available networks to seamlessly connect every GPU in the cluster and achieve optimal performance." She mentioned that trained AI models also need a reliable network to connect to end-users and provide fast responses, "so, data centers are evolving into new AI centers, and the network becomes the center of AI management," Ullal said.
It is interesting to note that although Arista benefits from the demand for AI, another rival, Juniper Networks Inc., is struggling to seize this opportunity. Although it is also increasing its investment in AI network products, sales and profits are below expectations. Due to the development being hindered, the giant Hui Yu Technology has reached out to acquire Juniper Networks for $14 billion.
From servers to switches, Bechtolsheim, this German genius, has set off one wave and revolution after another in Silicon Valley.
Angel InvestmentIt is worth mentioning that, Beckettolsheim is not only a technology-obsessed engineer and an opportunistic entrepreneur, but also a rather successful angel investor. He began to be active as an investor in the mid-1980s and participated in the establishment of many startups and existing companies. Among them, the most valuable investment is Google. At that time, people were still considering web directories instead of search engines, but he resolutely invested a large sum of money in Google.
Google founder Sergey Brin recalls: "We met him on the porch of a Stanford University faculty member's house in Palo Alto. We gave him a brief demonstration. He had to leave in a hurry, so he said, instead of discussing all the details, I'll write you a check. The check was made out to Google Inc. for $100,000."
His insightful investment in Google has yielded a huge return on investment. A few years after Google went public, the $100,000 quickly turned into $10 billion or even more. With this investment alone, Beckettolsheim became a billionaire.
Of course, it's not just Google. Beckettolsheim's successful investments in the field of electronic design automation (EDA) are also numerous. In the EDA company Magma Design Automation, his shares are worth about $60 million. He is also an early investor in another EDA startup, Co-Design Automation, which developed the SystemVerilog used in almost all digital hardware design.
When deciding whether to invest in an EDA startup, Beckettolsheim follows a simple rule of thumb. He said: "My whole strategy for dealing with companies is that if I can't figure out what they're doing in a 15-minute phone call, then I'm not interested." He said, "If it makes sense, I'll listen more. I invest in companies that make sense to me, companies that are doing what needs to be done. If I like the idea, others may like it too."
From the late 20th century to the early 21st century, when he continued to invest in EDA companies, Wall Street did not pay much attention to this industry. At that time, investors were busy focusing on various Internet companies, but Beckettolsheim was full of confidence in the EDA companies at the forefront of the deep sub-micrometer chip revolution.
"Most venture capitalists have lost interest in CAD," he said. "The time to go public is too long, and there are too many competitive opportunities in the Internet field. In addition, Wall Street has some confusion about the CAD revenue model, leading to lower valuations for publicly traded CAD companies.
"I don't think so. We are about to enter the largest CAD retooling phase in history, driven by very deep sub-micrometer technology. The best next-generation CAD tools will generate significant revenue and company valuations."
Beckettolsheim's interest in design tools began after he came to the United States as a student in the mid-1970s. In Germany, his engineering tools were pencils and paper, but when he came to Stanford University at the age of 19, he fully embraced EDA technology and achieved legendary results."I was supposed to be working on CAD," said Bechtolsheim, "but at the time, the only systems were mainframes. I thought it was impossible to run software on mainframes, instead, we needed a workstation to provide each user with dedicated mainframe computing power. This prompted me to design at Stanford what later became known as the Sun workstation." This design, in turn, led to "founding Sun Microsystems."
In this small and vibrant field, there are a variety of startups and many concepts that have not been realized. Bechtolsheim usually only focuses on the early stages of the financing cycle, choosing companies that take risks and make big strides, rather than those that make incremental improvements. "I usually get involved with companies in the first round or seed round," he said. "I invest in companies that have the right ideas and the right team, companies that are doing what needs to be done."
Around 2000, Bechtolsheim was interviewed by the media and explained his investment layout in the EDA field. He showed a keen interest in three areas at the time, namely improving verification, accelerating simulation, and reducing backend time.
"We have seen the first results of combining synthesis, layout, and routing tools, and they are very impressive," said Bechtolsheim. "This is a breakthrough technology that is truly needed. Front-end design can no longer be separated from back-end design."
Bechtolsheim also pointed out the imbalance between the pace of silicon change and the progress of tools. "It is astonishing to witness the speed of progress in deep sub-micron technology - chip technology is advancing at an astonishing rate," he said. "In my view, CAD tools have become a limiting factor. With a lot of money invested in wafer fabs and equipment, people are underinvesting in creating and deploying better tools."
In his own investments, "I focus on companies that have the potential to increase designer productivity tenfold. This is to keep up with the growth in the number of transistors per chip in the future."
Beyond being an engineer and entrepreneur, the role of investor not only made Bechtolsheim financially free but also highlighted his astonishing insight in the semiconductor industry. These three identities ultimately made him one of the most influential figures in Silicon Valley.
The Future of a Workaholic
After entering Silicon Valley for three to four decades, Bechtolsheim still loves to work very much. "For me, work is rarely like work, more like fun," said the founding team member of three Silicon Valley companies, the first investor in Google, and a person who has occupied a place on the Forbes billionaire list for more than ten years.
Bechtolsheim works because he wants to solve major problems. He is successful because he never forgets the original intention of work: to meet the needs of customers."The brilliance of this strategy lies in its avoidance of any internal debate about the right or wrong of future demands," he said. "More importantly, when we develop these products, we know that there are customers waiting for them. We know we can sell them and achieve a good return on investment."
For over a decade, Bechtolsheim has been working at Arista Networks, where he holds two positions: Chief Development Officer and Chairman of the Board. The one position he has no interest in is Chief Executive Officer, "That's not my skill," he simply said, explaining that his main focus is to work with the engineering team to develop the company's hardware.
Arista's CEO, Jayshree Ullal, who worked with Bechtolsheim after Cisco's acquisition of Granite, praised his vision and dedication as Chief Development Officer. "Andy has repeatedly created disruptive changes in Silicon Valley," Ullal said. "Andy is a visionary business leader with a strong pragmatic spirit. He can predict and timely turn to market trends and major markets before they appear, whether in founding companies or in investment."
However, Bechtolsheim has also encountered a little trouble recently. In March 2024, the U.S. Securities and Exchange Commission (SEC) accused him of misusing confidential information about Cisco's proposed acquisition of Acacia Communications, and said that his colleagues and relatives made more than $400,000 in profits through illegal option trading. He finally reached a settlement with the SEC on insider trading charges, agreeing to pay nearly $1 million in civil fines, and was banned from serving as an executive or director of a listed company within five years.
For Bechtolsheim, who has assets of tens of billions of dollars, this fine is just a drop in the ocean, and being banned from serving as an executive and director does not affect his continued passion for work - Arista confirmed that he still serves as the Chief Architect of the network business, and at the age of 68, he is still active on the front line of Silicon Valley.
Technology evangelist Jeremy Geelan wrote in his book "Does Google's Rise Mean the End of the Game for Everyone Else?" that Bechtolsheim was once asked, "Is the game over?"
His memorable response was: "Unless no one changes the rules of the game."
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