Cadence Design Systems (CDNS) opened comfortably in the green this morning after President Donald Trump’s administration removed restrictions from the export of chip-design software to China.
The announcement potentially signals that China is making significant progress on signing a trade deal with the U.S., which could prove materially positive for semiconductor firms across the board.
Including today’s gain, CDNS stock is up more than 40% versus its year-to-date low set in early April.
The U.S. lifting export restrictions on chip-design software is a meaningful tailwind for CDNS shares since it reinstates the company’s access to a crucial market that accounted for roughly 12% of its revenue in 2024.
According to Cadence Design Systems, it’s already working to restore sales and support to its Chinese customers, which will stabilize earnings in the near term and remove a huge overhang that had clouded investor sentiment.
For a company whose tools are foundational to next-gen chip innovation, regaining access to one of the world’s largest semiconductor markets will likely prove nothing short of transformative.
It’s this narrative that’s driving the Cadence stock price up on Thursday.
While the aforementioned announcement is notably constructive for CDNS stock, investors should still tread with caution in investing in the semiconductor software firm at current levels.
Why? Because it’s trading at a forward price-earnings multiple of nearly 58x at writing, which makes it significantly more expensive to own than its peer Synopsys (SNPS) at 48x only.
Concerns of overvaluation also pushed analysts at Berenberg into lowering their price target on Cadence shares last week to $330 from $348, indicating potential upside of only 1% from current levels.
Cadence Design Systems topped Street estimates for both profit and revenue in its latest reported quarter. Still, Wall Street does not forecast upside potential for shares over the next 12 months.
According to Barchart, the consensus rating on Cadence shares remains at “Strong Buy” but the mean target of about $324 is slightly lower than the current trading price.
