What Happened?
A number of stocks fell in the afternoon session after sentiment continued to weaken as tech stocks faced a dual headwind of deteriorating macro conditions and an unwinding of retail leverage.
The fundamental pressure stems from a sudden oil shock. A reinstated U.S. naval blockade on Iran pushed Brent crude past $85 a barrel, raising expectations that the Federal Reserve will hold rates in the 3.50%–3.75% range. For the software sector, this higher cost of capital could drive stricter scrutiny of AI investments. Investors might be hesitant to fund massive, margin-dilutive infrastructure buildouts without a clear timeline for returns.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Design Software company Cadence Design Systems (NASDAQ: CDNS) fell 9.4%. Is now the time to buy Cadence Design Systems? Access our full analysis report here, it’s free.
- Data Analytics company Domo (NASDAQ: DOMO) fell 6.9%. Is now the time to buy Domo? Access our full analysis report here, it’s free.
- Advertising Software company PubMatic (NASDAQ: PUBM) fell 5.1%. Is now the time to buy PubMatic? Access our full analysis report here, it’s free.
Zooming In On Cadence Design Systems (CDNS)
Cadence Design Systems’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock gained 9.2% on the news that the company reported better-than-expected fourth-quarter financial results and issued a strong outlook for 2026.
For the fourth quarter that ended in December 2025, Cadence announced revenue of $1.44 billion, up 6.2% year on year and slightly ahead of Wall Street's expectations. The company's profitability was a key highlight, with adjusted earnings per share of $1.99 surpassing analyst estimates by 4.1%. Looking ahead, Cadence provided an upbeat forecast. Its full-year 2026 adjusted earnings per share guidance of $8.10 at the midpoint beat consensus estimates, and its forecast for the upcoming first quarter also impressed investors. The positive results and outlook signaled continued demand for its electronic design automation software and hardware.
Cadence Design Systems is up 6.9% since the beginning of the year, but at $331.69 per share, it is still trading 20.3% below its 52-week high of $416.39 from June 2026. Investors who bought $1,000 worth of Cadence Design Systems’s shares 5 years ago would now be looking at an investment worth $2,408.
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