BofA’s List Of AI & Semiconductor Stocks That Fund Managers Love & Hate: 16 Stocks On The Manager Radar

14. Cadence Design Systems, Inc. (NASDAQ:CDNS)

Number of Hedge Fund Holders In Q2 2024: 64

Section: Losing Popularity

Cadence Design Systems, Inc. (NASDAQ:CDNS) is a key company in the semiconductor ecosystem. It provides semiconductor design blocks and other tools that enable chip designers to transform their products from concepts to usable items. However, its stock is down by 4.3% year to date as, despite AI-related demand from big-ticket names like NVIDIA, a broader slowdown in the semiconductor industry has led to guidance shortfalls over analyst estimates. The cycle of weakening outlook started in February when Cadence Design Systems, Inc. (NASDAQ:CDNS)’s Q4 2023 earnings the shares fell by 6% after its Q1 2024 midpoint guidance of $995.5 million missed analyst estimates of $1.08 billion. This trend continued during the two subsequent earnings calls when Cadence Design Systems, Inc. (NASDAQ:CDNS) guided its midpoint revenue for the next quarters at $1.04 billion and $1.180 billion which missed analyst estimates of $1.11 billion and $1.20 billion, respectively. Consequently, it’s clear that an industry slowdown is at the heart of Cadence Design Systems, Inc. (NASDAQ:CDNS)’s hypothesis, and any uptick in orders can lead to tailwinds.

Artisan Partners mentioned Cadence Design Systems, Inc. (NASDAQ:CDNS) in its Q3 2024 investor letter. Here is what the fund said:

“Bottom contributors to performance for the quarter included semiconductor design and simulation company Cadence Design Systems, Inc. (NASDAQ:CDNS). Cadence declined due to weaker-than-expected guidance, sensitivity to Cadence’s hardware product cycle in the near term, and uncertainty around China exposure.”