EDA software duopoly remains structurally unassailable
The guest argued that the bear case against electronic design automation (EDA) software giants Synopsys and Cadence - which claims AI will allow chip designers to bypass their software - is overstated.
The argument
The guest pointed out that Nvidia's multi-billion dollar investments and partnerships with Synopsys indicate that leading chipmakers still rely heavily on their libraries. Furthermore, EDA tools are critical for modeling the physical world digitally (e.g., Omniverse), saving massive amounts of capital by avoiding physical trial-and-error in data center and medical device design.
The thesis, stress-tested
✓ What validates it
- ✓Continued net dollar expansion and high retention rates in upcoming quarterly reports
- ✓Expansion of EDA tool applications into non-semiconductor fields like medical devices
▸ Risks discussed
- ▸AI companies successfully designing chips using in-house proprietary software
- ▸Multiple compression across the broader software sector
Hear it yourself
"I mean, I don't know the details of what they use, but EDA, electronic design automation, synopsis, and cadence, have been a duopoly for a long time, and they were sort of unassailable. And, obviously, now with software multiple headwinds, people are wondering if AI companies can just do it themselves."
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