Cadence Design Systems (CDNS) Benefits from Renewed Optimism in Semiconductor Design Software

Cadence Design Systems Inc. (NASDAQ:CDNS) is among the best stocks you’ll wish you bought sooner. On December 1, Oppenheimer analyst Edward Yang raised his rating on the stock to Perform from Underperform and increased his price target to $275 from $225 earlier.

This was a substantial change in his stance, as the analyst had been “skeptical for over a year” on the company due to potential competitive disruption. Moreover, he had been cautious about the company’s ability to monetize AI.

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The primary reason for the change in Yang’s stance was Nvidia’s announcement of a multi-year strategic partnership and a $2 billion investment in competitor Synopsys Inc. (NASDAQ:SNPS) on December 1. This collaboration will integrate Nvidia’s AI and accelerated computing capabilities with Synopsys’ engineering solutions to deliver enhanced design and simulation for intelligent systems.

While this investment strengthens Cadence Design Systems Inc.’s (NASDAQ:CDNS) rival, the analyst sees it as positive for the legacy Electronic Design Automation (EDA) and simulation sector, where both these players have a significant presence.

With improved sentiment towards the sector, the analyst applied a higher multiple, leading to an upward price target revision, though his earnings estimates remained unchanged.

Cadence Design Systems Inc. (NASDAQ:CDNS) is a leading provider of electronic design automation (EDA) software, hardware, and IP used by semiconductor companies to design and verify advanced integrated circuits and systems.

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Disclosure: None. This article is originally published at Insider Monkey.