MW Why Cadence's 'ChatGPT moment' may have already arrived

By Britney Nguyen

The rise of agentic AI tools should drive more demand for the company's electronic design automation systems, an analyst says

Needham raised its price target for Cadence's stock on Monday.

The past three years have seen a disconnect between artificial intelligence and the systems used to design the chips that power the technology, according to a Needham analyst. Now he thinks the next phase of AI will finally change the game.

The current AI-powered electronic design automation products made by Cadence Design Systems $(CDNS)$ and Synopsys $(SNPS)$ "have largely failed to move needles" for the companies, Needham analyst Charles Shi said.

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Following Cadence's release of agentic AI tools to automate the workflows of its EDA systems earlier this month, Shi now sees "a different beast" that has the potential to improve chip-design productivity by up to 1,000 times. Cadence's EDA systems include software and hardware for designing, simulating and verifying chips and printed circuit boards before production.

"The ChatGPT moment for EDA may have finally arrived, and agentic AI tools may be a game changer for the semiconductor industry," Shi wrote in a Monday note.

Cadence's stock rose 1.2% in recent morning trading. Since closing at a one-year low on April 10, the stock has run up 18.5% amid a six-day winning streak, which would be its longest since the eight-day streak that ended July 3, 2025.

With the stock's gain on Monday, it has edged up 0.7% this year to outperform the software sector, which has been hurt by worries about AI displacement, by a wide margin. The iShares Expanded Tech-Software Sector exchange-traded fund IGV, of which Cadence's stock is a component, has shed 19.2% in 2026.

In Shi's view, tool calling, or the ability of AI models to work with external tools enabled by AI agents, will likely lead to major growth for EDA licenses.

Additionally, Shi sees agentic AI EDA tools easing the labor bottleneck for customer-owned tooling, or the process of a customer, rather than the chip supplier or manufacturer, owning the chip-manufacturing tools and equipment. That's because chip-design costs would likely depend less on salaries for engineers and more on the cost of tokens, or units of data processed by AI models, he said.

If that case plays out, Shi said he could see hyperscalers leaning more toward customer-owned tooling, which would be bullish for EDA systems.

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"With potential license growth 'exploding,' potential materialization of [customer-owned tooling] and EDA industry waking up to the urgent need to change business model," Shi said, he thinks it's "about time to get back to EDA stocks."

Shi raised his price target for Cadence's stock to $400, which implies about 27% upside from current prices. He also noted Cadence's completed acquisition of software maker Hexagon's design and engineering business in February, which should be accretive to its earnings per share in 2027.

-Britney Nguyen

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April 20, 2026 11:19 ET (15:19 GMT)

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