Needham supports EDA giants: Cadence Design Systems (CDNS.US) and Synopsys, Inc. (SNPS.US) unjustly attacked, artificial intelligence expected to drive industry growth acceleration.

Amidst the recent multiple trading days of decline in the stock prices of Cadence Design Systems (CDNS.US) and Synopsys, Inc. (SNPS.US), investment bank Needham reiterated its "buy" rating on these two electronic design automation (EDA) giants and once again emphasized their core investment thesis - that Agentic AI (Agentic AI) will drive a reacceleration of growth in the EDA industry. Led by analyst Charles Shi, Needham analysts stated that the biggest concern of short sellers in the EDA industry has always been the disruptive impact that AI could bring to the industry. The recent short selling sentiment has further intensified, especially after the launch of Kimi K3 by Yuezhi Darkmoon. This model utilizes large language models (LLM) to demonstrate a certain level of automated chip design capabilities, heightened market concerns about AI replacing EDA tools, and led to consecutive days of decline in the stock prices of Cadence Design Systems and Synopsys, Inc. - as of the close of the US stock market on Monday, Cadence Design Systems has fallen for seven consecutive trading days, while Synopsys, Inc. has fallen for six consecutive trading days. Analysts rebutted the short thesis of "AI disrupting the EDA industry" and argued that the related concerns were significantly overstated. EDA companies have also responded to this argument multiple times, emphasizing that they are actually beneficiaries of AI development, especially after the rise of Agentic AI, this technology is expected to reignite growth in EDA software licensing. Analysts stated, "Overall, we believe that the application of large language models (LLM) is likely to be mainly limited to RTL (Register Transfer Level) code writing, which will not affect the largest categories of tools in EDA software, such as Synthesis, Place and Route, and Physical Verification." Furthermore, analysts stated, "We believe that Agentic AI is not a disruptor of EDA, but rather a supplement to EDA, with real potential to drive a reacceleration of growth in EDA software licensing. We have also compiled industry experts' true opinions on 'AI-native EDA'. Overall, we believe that AI-native EDA is still quite far from having a significant impact on the real industry." The analyst added, "From the stock market perspective, we have observed a pessimistic narrative surrounding AI risks, which has led to a significant mispricing in the EDA sector." Analysts advised investors to seize the opportunity brought by this mispricing and once again reiterated to remain optimistic about the core investment thesis of "Agentic AI driving a reacceleration of growth in the EDA industry". This view echoes the recommendation given by analysts at BNP Paribas last week, who similarly believed that the sell-off experienced by Cadence Design Systems and Synopsys, Inc. was baseless and advised investors to "buy on dips".