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Cadence's (CDNS) Solutions to Aid Broadcom Design 5nm Chips

Zacks Equity Research

Cadence Design Systems, Inc. CDNS recently extended alliance with Broadcom AVGO with an aim to create 5 nanometer (nm) technology based designs.

The company’s digital implementation solutions will be utilized by Broadcom to design robust 5nm chips with optimized power, performance and area (PPA) parameters.

Moreover, the company’s digital implementation tools support Intelligent System Design strategy, which ensures system-on-chip (SoC) design excellence.

Notably, Broadcom has been leveraging Cadence’s design tools to create robust 7nm technology based designs.

Incremental adoption of Cadence’s 5nm and 7nm based design solutions, is expected to boost the top line in the days ahead.

Strength in 5nm Portfolio: A Key Catalyst

Cadence continues to invest heavily in digital implementation and signoff products, which is helping it to launch products that address the ever-growing needs of electronics and semiconductor companies.

Markedly, the company offers comprehensive portfolio of digital implementation and signoff tool flow products, which are certified on TSMC’s 5nm process.

For instance, Cadence Innovus Implementation System is integrated with advanced hierarchical partitioning flow capabilities and robust block implementation features.

Meanwhile, Voltus IC Power Integrity solution boasts of distributed processing capabilities, which makes it efficient in analyzing electro-migration processes.

Robust features of Cadence’s solutions facilitating development of advanced-node designs are bolstering adoption, which is instilling investor optimism in the stock. Notably, shares of Cadence have returned 60.4% in the past year, outperforming the industry’s rally of 42.7%.

What Investors Should Know?

Ongoing proliferation of AI, 5G and ADAS chipset making across wireless, networking, enterprise storage, and industrial applications, is fueling demand for computational software tools, which favors Cadence.

Moreover, the company is evolving its silicon-based design strategy with an aim to meet complex computing demands of emerging ADAS, 5G and AI applications. In fact, the company has created a new System Analysis Group to focus exclusively on system analysis and design.

Further, easy integration of its in-house offerings provide support to customers during implementation and signoff stage is bolstering adoption of its solutions.

The growing adoption of Cadence’s offerings is expected to strengthen the company’s presence in the Electronic Design Automation (EDA) market. Per Mordor Intelligence data, the EDA tools market is forecast to hit $10.23 billion by 2025 compared with $6.81 billion in 2019 at a CAGR of 7.8%.

Moreover, the ongoing digital transformation across aerospace and medical verticals holds promise.

We believe that the extended collaborations and strategic product rollouts in growth markets will bolster the company’s financial performance.

Zacks Rank & Other Key Picks

Currently, Cadence carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks worth considering in the broader sector are Keysight Technologies Inc. KEYS and Fortinet, Inc. FTNT. Both the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Keysight and Fortinet is currently pegged at 9.1% and 14%, respectively.

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