Is Cadence Design Systems, Inc. (CDNS) A Good Stock To Buy Now?

Is CDNS a good stock to buy? We came across a bullish thesis on Cadence Design Systems, Inc. on ARMR Report Be The Smart Money’s Substack by Bret Rosenthal. In this article, we will summarize the bulls’ thesis on CDNS. Cadence Design Systems, Inc.'s share was trading at $394.24 as of June 8th. CDNS’s trailing and forward P/E were 87.69 and 47.39 respectively according to Yahoo Finance.

Cadence Design Systems, Inc. develops computational, AI-driven software, hardware, and silicon intellectual property products and solutions. CDNS is emerging as one of the most critical picks-and-shovels beneficiaries of the artificial intelligence infrastructure cycle, positioned at the center of a structural bottleneck in semiconductor design.

Operating as a virtual duopoly alongside Synopsys in the Electronic Design Automation (EDA) market, Cadence provides the software required to design, simulate, and verify advanced AI chips, making its tools indispensable for hyperscalers and chipmakers developing next-generation processors.

The investment thesis is strengthening as the industry transitions from GPU-dominated generative AI workloads toward Agentic AI systems, which require significantly more high-performance CPUs and exponentially greater chip complexity. As chip architectures migrate toward advanced nodes, chiplets, and 100+ billion transistor designs, Cadence’s software becomes increasingly essential due to rising thermal, timing, and electromagnetic challenges.

The company benefits from a highly recurring, asset-light business model, with more than 80% subscription-based revenue, a record $7.8 billion backlog, FY2025 revenue growth of 14% to $5.3 billion, and elite non-GAAP operating margins of 44.6%. Beyond semiconductors, Cadence is expanding into system-level digital twin simulations for entire AI data centers, allowing customers to optimize thermal dynamics, airflow, and power delivery before physical deployment.

Its AI-powered Cerebrus platform further enhances customer productivity by autonomously optimizing chip floor planning and power consumption. While valuation remains elevated and China-related export restrictions create regulatory risk, Cadence appears uniquely positioned to compound alongside the multi-year AI infrastructure buildout, quietly monetizing nearly every major compute advancement across the semiconductor ecosystem.

Previously, we covered a bullish thesis on Synopsys, Inc. (SNPS) by The Equity Analyst in February 2025, which highlighted the company’s dominance in EDA software, semiconductor IP, and its critical role in enabling complex AI-driven chip designs. SNPS’s stock price has depreciated by approximately 10.88% since our coverage. Bret Rosenthal shares a similar view but emphasizes Cadence Design Systems, Inc.’s (CDNS) growing role in Agentic AI infrastructure and digital twin simulations.

Cadence Design Systems, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 66 hedge fund portfolios held CDNS at the end of the first quarter which was 65 in the previous quarter. While we acknowledge the risk and potential of CDNS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CDNS and that has 10,000% upside potential, check out our report about this cheapest AI stock.