Liontrust fund manager Clare Pleydell-Bouverie said investors had “completely missed” Cadence Design Systems, a U.S. company that provides electronic design software to chip manufacturers. The tech investor explained that Cadence is part of a rare duopoly with only one competitor: Synopsys. Liontrust’s Global Technology Fund, which had $265 million in assets as of April 30, was invested in the two stocks, with an allocation of about 3.3% to each stock. ‘s Pro Talks told CNBC’s Arabile Gumede. “But because it’s an effective duopoly, there’s a real need to do it.” Cadence recently announced new tools as it reported quarterly earnings to help chipmakers such as TSMC, GlobalFoundries and Global Unichip be more run its manufacturing processes efficiently. In April, Cadence launched the Protium X3 system, a tool for engineers to find and solve design problems before building computer chips. In addition, the company has launched the Palladium Z3 system, which is expected to simulate the software running on the chip before it is manufactured. The systems are designed to work together to reduce the cost of wafer design and testing, the company said. “We think the market is really underestimating this,” Plunder-Buffry said. Cadence shares are up 5.12% this year and 25% over the past 12 months — though that growth has been much more modest than that of many other chip-related stocks. “When we think long term, we think about what this advancement and product innovation from Cadence will actually accomplish if we were to see chips five times the size of Blackwell come to market,” she said. AI chip. “Cadence will be a key enabler of all this, but the market has completely ignored this.” Pleydell-Bouverie also pointed out that Cadence benefits from “double growth momentum” – the company designs more chips to bring artificial intelligence capabilities to consumers, Cadence uses artificial intelligence to improve its chip design process and efficiency. Cadence’s gross profit margin is close to 90%. FactSet data shows that the company’s pre-tax net profit margin has also risen steadily to more than 30% over the past decade. Pleydell-Bouverie also pointed out that approximately 80-85% of Cadence’s revenue is recurring, making it a “mission-critical component” of the semiconductor design process. Cadence shares fell after first-quarter earnings. The report showed that revenue fell to $1.01 billion from $1.02 billion a year ago. In addition, the company also lowered Wall Street’s expectations for the future and said it expected second-quarter revenue to be between $1.03 billion and $1.05 billion. Still, analysts remain generally bullish on the stock, with 67% rating it a buy and 28% maintaining a hold rating. The $322 average price target implies an upside of 12.5% from current shares, according to FactSet data.
