Dependency on electronic design automation (EDA) tools for high performance with low power consumption, primarily by the consumer electronics industry, is one of the major factors driving the growth of the global EDA industry. Also, the miniaturized electronic products trend is fostering a positive investor outlook on the industry. So, we think fundamentally strong stocks in this space, Synopsys (NASDAQ:SNPS) and Cadence Design (NASDAQ:CDNS), are worth betting on now. Read on.An acceleration in demand for complex integrated circuits (ICs) and technologically advanced consumer electronics, along with the growing adoption of connected devices, such as smartphones, wearables, and smart home systems, are the major factors fueling the growth of the electronic design automation market. The global electronic design automation industry is expected to reach $18.1 billion by 2026, registering a 7.7% CAGR.
Although the industry saw a dip in its growth rate due to the COVID-19 pandemic and a semiconductor chip shortage, a trend in miniaturized electronic products is building a positive outlook in the market. Rising utilization of microprocessors, advancements in System on Chip (SoC) technology, and extensive research and development (R&D) activities should power the industry's growth further.
Therefore, we think fundamentally sound stocks in the electronic design automation space Synopsys, Inc. (SNPS) and Cadence Design Systems, Inc. (CDNS) are well-positioned to cash in on the industry’s strong growth potential.