Cadence Design Systems (CDNS) Shares Soar 10% Amid U.S. Export Restrictions

Cadence Design Systems (CDNS) shares surged to their highest level since January 2025 today, with an intraday gain of 0.10%.

Over the past five years, the strategy of buying CDNS shares after they reached a recent high and holding for one week delivered strong returns. The strategy achieved an impressive 113.35% return, surpassing the benchmark return of 49.45% by a significant margin of 63.90%. Although the strategy had a maximum drawdown of -21.07% and a Sharpe ratio of 1.28, indicating some risk and moderate returns, the compound annual growth rate (CAGR) was 37.55%, reflecting the strategy's overall effectiveness in driving gains over the period.

The recent directive from the U.S. Commerce Department has significantly impacted Cadence Design Systems' stock performance. The directive instructs American semiconductor design software firms, including Cadence, to stop selling their Electronic Design Automation services to Chinese entities. This move is part of broader U.S. efforts to control technology exports amid geopolitical tensions, limiting China's access to critical software for chip development and affecting Cadence's operations and revenue streams.

Despite Cadence's strong financial performance in Q1 2025, with a 23% revenue growth and a 34% increase in non-GAAP EPS, the company remains cautious about its China business due to macroeconomic uncertainties. This caution is reflected in the company's flat revenue outlook for the region, contributing to the current stock price volatility.