Cadence Design Systems' stock (CDNS) experienced a significant plummet of 6.22% during Thursday's trading session, largely in reaction to its rival Synopsys' (SNPS) weaker-than-expected outlook for the next quarter and fiscal year.

Synopsys, a leading chip design company, reported adjusted fiscal fourth-quarter earnings that beat expectations. However, its revenue guidance for the first quarter of 2025 and the full year fell short of analysts' estimates. This disappointing outlook sparked concerns among investors about the prospects for the chip design software industry, with Synopsys' stock plunging nearly 12% on Thursday.

As a result of the negative sentiment surrounding Synopsys' guidance, Cadence Design Systems, a major player in the same industry, saw its stock shed more than 5% in sympathy. Analysts speculate that investors are growing cautious about the demand for chip design tools, particularly in the face of potential headwinds or a slowdown in the semiconductor industry.