Needham Supports EDA Giants: Cadence Design Systems (CDNS.US), Synopsys (SNPS.US) Undervalued—AI Agents Expected to Accelerate Industry Growth

According to Zhitong Finance APP, as Cadence Design Systems (CDNS.US) and Synopsys (SNPS.US) have seen their share prices decline over several recent trading days, investment bank Needham has reiterated its "Buy" ratings on these two Electronic Design Automation (EDA) giants and once again emphasized its core investment logic—the view that Agentic AI will drive the EDA industry back into an accelerated growth phase.

Needham analysts led by Charles Shi noted that the largest concern of the bears regarding the EDA industry has always been the potentially disruptive impact AI could bring. Bearish sentiment has intensified recently, especially after Moonshot AI released the Kimi K3. This model leverages large language models (LLM) to demonstrate a certain automated chip design capability, which has deepened market concerns over AI replacing EDA tools and led to the consecutive drop in Cadence Design Systems and Synopsys' share prices—by Monday's US market close, Cadence Design Systems had fallen for seven straight trading sessions, while Synopsys declined for six consecutive sessions.

The analysts refuted the bearish argument that "AI will disrupt the EDA industry," deeming such concerns clearly exaggerated. EDA companies have repeatedly responded to this issue, stressing that they are in fact beneficiaries of AI development. Especially with the rise of Agentic AI, this technology is expected to reignite EDA software licensing growth.

The analysts stated: "Overall, we believe the application of large language models (LLM) will likely remain mostly confined to RTL (Register Transfer Level) code writing, which does not affect the largest categories of EDA software tools, such as synthesis, place and route, and physical verification."

The analysts further noted: "We believe Agentic AI does not disrupt EDA, but rather complements it, and it truly has the potential to drive a reacceleration of growth in EDA software licensing. We have also collected the real opinions of industry experts about 'AI-native EDA.' On the whole, we believe AI-native EDA is still quite far from having a major impact on real-world industries."

The analysts added: "From a stock market perspective, we observe that the pessimistic narrative around AI risks has led to clear mispricing in the EDA sector." The analysts recommend that investors take advantage of the opportunities stemming from this mispricing, while once again reiterating their optimism in the core investment logic that "Agentic AI will drive a renewed acceleration of growth for the EDA industry." This viewpoint echoes the recommendations given by BNP Paribas analysts last week, who likewise argued that the previous selloff of Cadence Design Systems and Synopsys was completely unfounded, advising investors to "buy the dip."