Resilient By Design

Cadence Design Systems $CDNS ( ▲ 7.6% ) has been caught in this year’s software selloff, down around 2% in 2026 on fears that AI could disrupt its business model.

Bank of America is not buying that narrative.

The firm reiterated its Buy rating and set a $375 price target, implying roughly 24% upside from today’s close.

In BoA’s view, the electronic design automation provider remains well insulated from AI disruption, and could actually benefit from rising semiconductor R&D budgets.

Bank of America argues there have been no customer discussions about reducing usage of electronic design automation software.

Instead, the bank sees three layers of protection.

First, AI adoption is expected to increase semiconductor R&D spending and the share allocated to EDA tools, currently about 15%. Designing more complex chips requires increasingly sophisticated software.

Second, Cadence is deeply integrated with customer design teams and long-term roadmaps, raising switching costs.

Third, years of accumulated chip design data give Cadence an edge in accelerating its own AI-enabled tools versus more generic merchant AI models.

The bullish stance comes after a solid fourth quarter, in which Cadence delivered a top- and bottom-line beat.

JPMorgan $JPM ( ▲ 0.54% ) and Wells Fargo $WFC ( ▲ 1.33% ) also reiterated Buy equivalents following the report, echoing the view that AI workflows are increasing software usage, not replacing it.

In these banks’ view, AI may change chip design, but it does not appear poised to cut Cadence out of the process.