Cadence Design Systems (CDNS) gets a "warning" shot for the legacy physics-based software sector following the recent share price drop in French software company Dassault Systemes, Oppenheimer said in a note Thursday.

"As investors reassess legacy platforms, there's mounting headwinds for Cadence," the report said.

Cadence is also facing elevating risk and scrutiny ahead of its Q4 results and initial guidance on Feb. 17, the note said.

The report said Cadence's annual guidance was a "downside event" last year, and added that Cadence is only down 5% year to date compared with the 22% drop in the iShares Expanded Tech-Software Sector ETF.

The note said that the "surprise of 2026 has been the sharp compression" of the iShares Expanded Tech-Software Sector ETF after Claude Opus 4.6 fueled an "aggressive rotation" from software companies into computer chips firms.

The report also said it was not a "positive" signal that the management sold about $424 million of shares since ChatGPT.

Oppenheimer kept its $275 price target and perform rating.

Price: 292.68, Change: -6.97, Percent Change: -2.33