Cadence Design Systems: Capitalizing on AI-Driven EDA Demand and Physical AI Infrastructure to Support Reaffirmed Buy Rating

In a report released today, Charles Shi from Needham reiterated a Buy rating on Cadence Design, with a price target of $390.00.

Charles Shi’s rating is based on several factors that underscore Cadence Design Systems’ strong strategic positioning and growth prospects. He views the common bearish argument that AI will reduce EDA software “seats” as misguided, noting that the rising complexity of AI chips is actually driving much heavier design workloads and, in turn, greater demand for Cadence’s licenses. He also highlights the trend of large cloud providers bringing more chip design in-house as an emerging catalyst that could accelerate EDA growth, even if the timing and shape of that opportunity are still evolving. Moreover, he believes Cadence is well placed to benefit from the broader “Physical AI” opportunity tied to large-scale generative AI infrastructure, which can fuel growth across both its core EDA/IP offerings and its system design and analysis (SD&A) portfolio.
Shi further emphasizes that the integration of agentic AI into EDA tools should boost designer productivity, shift engineers toward higher-value work, and ultimately expand EDA’s share of semiconductor R&D budgets as more customers undertake their own chip development. He also views Cadence’s disciplined strategy—prioritizing organic growth in high-growth SD&A areas and avoiding large, legacy-heavy acquisitions—as a competitive advantage that maintains focus and preserves growth quality. After the discussion with the CEO, Shi came away with increased confidence in management’s AI vision and Cadence’s ability to capture emerging opportunities. These considerations collectively support his reaffirmed Buy rating and $390 price target on CDNS.

In another report released on December 16, Mizuho Securities also maintained a Buy rating on the stock with a $400.00 price target.