Will this duopoly and the "indestructible" AI toll gate survive the AI revolution?
Whoever wins the AI chip race will pay this company. Yet its stock lost 34% this year and then recovered almost everything in three weeks. The market reconsidered twice what it is actually buying. Where is the truth?
Key points
The stock fell 34% this year and returned almost to its previous level in three weeks, without the company announcing anything
A Chinese lab presented a chip designed in 48 hours without a single license from Cadence or Synopsys
Record quarter, backlog of $8.1 billion and raised guidance were not enough to calm the market
Analyst consensus targets $405, Bulios fair value model points to $162.6
Results on October 26 and the Fed meeting a day later will decide which of three scenarios will play out
The road there and back: 34% down, 29% up, and no one really knows why
Imagine a stock that completely changed its story twice in three months. In June, Cadence Design Systems $CDNS stood at a record $416.69 and was considered one of the safest bets on artificial intelligence. Three months later, on September 16, it closed at $273.96. That's a drop of 34% for a company that in the meantime announced the best quarter in its history and raised its full-year guidance.
Then came a turnaround as sharp as the fall. From the September low, the stock jumped 29% and on October 1 added 7.4% in a single day, without the company announcing anything. An interesting detail: trading volume that day was 88% lower than usual. The stock wasn't pushed up by large institutional players, but by a broader wave of buying in semiconductor names ahead of a new Nasdaq 100 record.
Today Cadence trades around $353, market cap is roughly $97 billion, and the stock trades at 70 times earnings over the last twelve months. The question everyone holding or considering this stock must ask: what is the market actually valuing when it priced the same company at $274 and $417 within one summer?