Top semiconductor and electronic design automation (EDA) software company Cadence Design Systems (NASDAQ: CDNS) has been on a tear this year, up nearly 50% so far in 2023 and near its all-time highs. The company just released a stellar earnings update, providing at least some validation for the stock's run so far and its rich valuation today. 

But given market turbulence exacerbated by ongoing fears of a weakening global economy due to high interest rates, some may wonder why Cadence's run-up hasn't slowed. In a word, it's because of AI. 

EDA software is an oligopoly, dominated by Cadence and peers Synopsys and EDA (formerly known as Mentor). Cadence and the EDA oligopoly control the gateway into the semiconductor world. Think of EDA as a type of computer-aided drafting service purpose-built for the mind-bogglingly complex chip manufacturing and computing systems industry. Just about everyone involved in semiconductors, computing systems, data center operators, and the like rely heavily on this software. 

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Source Fool.com