This A.I. stock has a unique 'secular bull trend,' market technician says

Published Wed, Jul 12 20233:25 PM EDT

Electronic design company Cadence Design Systems is a stock to watch in the artificial intelligence space, according to Katie Stockton, founder and managing partner of Fairlead Strategies. "Cadence Design is one stock that's just been forging higher, stair-stepping higher, if you will," Stockton said during a special PRO Talks roundtable on A.I. for CNBC PRO subscribers. Stockton said Cadence is interesting from a technical perspective because it has a long-term uptrend in place and is not just seeing the short-term move up that other stocks with exposure to AI have seen. The stock has outperformed in both 2022 and so far in 2023, with Stockton noting the stock was one of few in the AI space to not underperform the broader market last year. Shares slipped 13.8% last year, but have more than erased those losses with a 44.6% gain year-to-date in 2023. "It's not really a turnaround play," she said. "It's actually an established sort-of secular bull trend." CDNS 5Y mountain Cadence shares over the last five years When looking at 2023 performance, she said the stock has shown "no signs of exhaustion" and there have been no sell signals despite a few breakouts. And Stockton said some short-term gauges suggest the stock can push through what she described as a short-term consolidation period. Trent Masters, portfolio manager at Alphinity Investment Management, agreed with Stockton, noting the increasing number of companies wanting to design their own semiconductors, which can help the company as it specializes is electronic design automation software. He also noted the company reinvests in creating new products while still having strong financials. "It's just a very, very special business," Masters said. "That just puts a nice little secular uptrend underneath that business in terms of where you can see revenue and also earnings going." "I just think it has got a compelling market position and a very strong growth outlook ahead of it," he added. More than four out of every five analysts rate the stock a buy, according to Refinitiv. The average price target implies shares could gain another 2% over the next year.