Goldman Sachs Begins Coverage of Cadence Design Systems (CDNS) Stock

Cadence Design Systems, Inc. (NASDAQ:CDNS) is one of the Most Promising AI Stocks to Buy Now. Goldman Sachs initiated coverage of the company’s stock with a “Buy” rating and a price objective of $380, as reported by The Fly. The firm believes that Cadence Design Systems, Inc. (NASDAQ:CDNS) is one of the most high-quality compounding businesses in its coverage universe. Furthermore, it noted the company’s exposure to multiple growth drivers across the semiconductor industry.

The firm initiated the US digital semiconductor and electronic design automation software group, highlighting that it remains constructive on merchant silicon and EDA vendors tied to AI-related capital spending. As per the firm analyst, the AI investment cycle is in a transition state, but it can sustain growth from current levels. Cadence Design Systems, Inc. (NASDAQ:CDNS)’s core EDA revenue increased 16% YoY in Q1 2025. AI-driven Cadence Cerebrus saw strong momentum with ~50 new logos in the quarter. Cadence Design Systems, Inc. (NASDAQ:CDNS)’s resilient software business model, healthy backlog, and AI-driven product innovations place it well in navigating the dynamic macro environment.

As the fast-evolving AI landscape continues to expand the market opportunities and reshape the entire chip and system development process, the company’s Cadence.AI portfolio provides unparalleled PPA, productivity, and time-to-market benefits.

Cadence Design Systems, Inc. (NASDAQ:CDNS) provides electronic design automation (EDA) software, which is used in designing and optimizing AI chips and systems. Rothschild & Co Wealth Management, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:

“In the first quarter we made two new investments, building positions in semiconductor design software provider Cadence Design Systems, Inc. (NASDAQ:CDNS) and leading aerospace company General Electric Aerospace. No divestments were made, leaving the portfolio with 25 ownership stakes.

Cadence, alongside its peer Synopsis, is the leading provider of software used to design semiconductor chips, also known as electronic design automation (EDA) software. Together, they control over two thirds of their target market. EDA solutions are absolutely mission critical to the semiconductor industry – particularly as chip complexity increases further – yet they only account for a small share of customer spend. This, coupled with an increased focus on value based pricing, positions Cadence well for further sales growth in the double digits and continued meaningful margin improvements. What’s more, the majority of sales are delivered via recurring subscriptions, thus providing strong visibility on future revenues, its notoriously volatile end market notwithstanding. The recent pullback allowed us to build a position in a business with durable double digit growth at just over 30x one year forward earnings.”

While we acknowledge the potential of CDNS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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