Cadence Design Systems (CDNS) Valuation Check After ChipStack AI Super Agent Launch And Renewed Investor Interest

Cadence Design Systems (CDNS) has put AI at the center of its story with the launch of the ChipStack AI Super Agent, an agentic workflow that automates front end chip design and verification.

See our latest analysis for Cadence Design Systems.

The ChipStack AI Super Agent launch comes as Cadence Design Systems’ share price has seen mixed momentum, with a 1-day share price return of 3.86% and a 7-day return of 5.62%, set against a 30 day share price return of 4.38% and a year to date share price return of 3.52%. Even so, longer term total shareholder returns of 54.01% over three years and 114.42% over five years suggest the recent pullback sits against a much stronger multi year run. News like this AI rollout is helping shape how investors reassess both growth potential and risk around the current US$299.46 price.

If this AI story has caught your attention, it could be worth seeing what else is happening in the sector through our screener of 34 AI infrastructure stocks as another set of ideas to research.

With annual revenue growth of 10.26%, net income growth of 16.24% and a value score of 1, Cadence already carries high expectations at around US$299. So is this AI push still mispriced upside, or is the market already baking in future growth?

Most Popular Narrative: 22.1% Undervalued

With Cadence Design Systems last closing at $299.46 against a narrative fair value of about $384.20, the most followed view sees meaningful upside still on the table.

The expanding partnership with major industry players like NVIDIA and Intel, including initiatives such as 3D-IC and data center digital twins, positions Cadence for future competitive advantages and new revenue streams.

The company is seeing strong demand in its IP business, with a 40% year-over-year growth in Q1 2025 driven by AI, chiplet-based architectures, and new foundry opportunities, which is likely to contribute positively to future revenues.

Read the complete narrative.

Curious what kind of earnings power and profit margins need to sit behind that fair value? The narrative leans on faster profit growth, richer margins, and a premium future earnings multiple that still stays above the broader software group. The exact mix of those levers might surprise you.

Result: Fair Value of $384.20 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that upside story can break quickly if geopolitical tension around China hits demand, or if key AI partnerships such as NVIDIA or Intel fail to deliver as expected.

Find out about the key risks to this Cadence Design Systems narrative.

Another View: High P/E Tells A Different Story

That 22.1% narrative discount sits awkwardly next to the current P/E of 76.8x, which is far richer than the US Software industry at 26.7x, peers at 37.2x, and even the fair ratio of 36.2x. If sentiment cools, the price could potentially move closer to that fair ratio instead.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Cadence Design Systems Narrative

If you find yourself looking at these numbers and coming to a different conclusion, that is the point. Use the same data, test your own assumptions, and Do it your way in under 3 minutes.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Cadence Design Systems.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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