Cadence Design Is Cementing Its Place in the 2nm AI Chip Race By Solving the Die Size Limit in Partnership With a Major Chipmaker

Cadence Design Systems (CDNS) has just announced a multi-year partnership with Samsung Foundry to provide chipmakers a fully certified production-ready design platform for building next-generation AI chips. The collaboration targets Samsung’s 2nm process, combining it with Cadence’s 3D-IC design support. As artificial intelligence pushes the limits of the performance that can be squeezed out of a single die, chipmakers have started stacking multiple dies vertically to pack more compute and memory into a single package. The technique, also known as 3D-IC, requires the right EDA tools and IP blocks, which Cadence will now provide to Samsung.

It is worth noting that this partnership also involves integration of Nvidia’s (NVDA) NVLink-C2C technology, which links the GPUs and CPUs to high-bandwidth memory, a must-have for AI workloads. Through this, Nvidia is acting as a technology enabler rather than just an end customer later on. Moreover, Nvidia’s CUDA-X GPU-accelerated libraries are also at the disposal of Cadence and Samsung, helping accelerate EDA simulation and workloads to reduce the time it takes to verify designs. The simulations at 2nm are already quite compute-intensive, and the GPU-accelerated libraries make it easier for Cadence to deliver the product. 

Investors would also appreciate that this partnership isn’t just a future promise. The involvement of Ambarella (AMBA) shows that edge AI processors, ones that will power AI on our handheld devices or wearables in the future, are important to these companies. Ambarella has positioned itself at the forefront of Physical AI and computer vision, possibly leading tomorrow’s artificial intelligence workloads in our day-to-day life. For Cadence, working closely with such a company can help provide the relevant testing tools for future chips.

About Cadence Stock

Cadence Design Systems is a developer of AI-driven software, hardware, and silicon IP solutions used in chip design and development. The company offers a range of verification tools, including Jasper for formal verification, Xcelium for logic simulation, Verisium for generative AI, and Palladium and Protium for emulation and prototyping. Its portfolio also includes front-end verification and virtual prototyping technologies, controllers, and physical interface solutions.

After a poor start to the year, Cadence stock has recovered well since the beginning of April and is now up over 33% YTD. This is a severe underperformance compared to the iShares Semiconductor ETF’s (SOXX) 81.4%. However, there are good reasons for this. Cadence experienced valuation compression as investors piled into AI hardware stocks. Since SOXX mainly tracks semiconductor companies that make physical chips and AI hardware, it was hard to catch up to it for a company that mainly provides the testing software to go along with it. The negative sentiment surrounding software stocks in Q1 also didn’t help. The company also faces near-term margin pressures as it invests in new partnerships, acquisitions, and technologies to stay relevant in an ever-changing AI ecosystem.

Cadence Reports a Strong Start to 2026 

Cadence reported first-quarter FY 2026 earnings on April 27, with results coming in above expectations. Revenue for the quarter rose 18.5% year-over-year to $1.47 billion, beating the analyst estimate by $10 million. Cadence posted non-GAAP EPS of $1.96, exceeding market expectations by $0.07. Operating cash flow totaled $356 million, while the company returned $200 million to shareholders through share repurchases. The company ended the quarter with a strong backlog of $8 billion. 

As per the updated outlook, the firm expects full-year 2026 revenue to range from $6.13 billion to $6.23 billion compared to a consensus estimate of $6.18 billion. Non-GAAP operating margin is expected to be in the range of 43.5% to 44.5%. Non-GAAP diluted net income per share is estimated at $7.85 to $7.95, in line with the market expectations of $7.90. For the second quarter of 2026, revenue is projected in the range of $1.56 billion to $1.6 billion, and non-GAAP EPS between $2.02 and $2.08. 

What Are Analysts Saying About Cadence Stock?

Following its earnings report, a few financial services firms updated their price targets and ratings on the stock. On April 28, KeyBanc analyst Jason Celino raised the firm’s price target on Cadence from $405 to $425 while reaffirming an “Overweight” rating. The firm pointed to strong Q1 results, with an organic revenue beat of $14 million. To further strengthen the bullish stance, Bank of America Securities also increased its price target on the shares from $375 to $400 while keeping a “Buy” rating. 

More recently, Wells Fargo raised its price target on the stock from $400 to $425 while Berenberg Bank raised its price target from $400 to $440. Both these ratings came just before the collaboration with Samsung was announced.

According to 23 Wall Street analysts covering the stock, it holds a consensus “Strong Buy” rating. This reflects strong analyst confidence, further supported by recent upward revisions to price targets. Based on estimates, Cadence has a mean price target of $386, which suggests about 7% downside from the current levels.