US lifts export curbs, boosting chip design software stocks

For a few turbulent weeks, the US semiconductor design industry was bracing for a blow. Export curbs announced in late May cut off access to Chinese customers for leading chip software providers Synopsys and Cadence Design Systems—two companies whose tools are vital to the global semiconductor stack. The restriction hit hard: over 10% of revenue for each firm came from the region. Forecasts were pulled back. Valuations stumbled.

But on Thursday, the US quietly rolled back the restriction. Shares in both companies surged. Analysts noted the damage would now be limited to one month’s worth of revenue loss in the current quarter. A narrow escape.

Yet while the headlines fixated on share price recovery, the more significant movement is strategic. The policy whiplash clears a path for Synopsys to resume momentum on its US$35 billion acquisition of Ansys, a deal that had been stalled in part by Chinese regulatory approval concerns. The question now is: was this policy reversal a tactical retreat—or a subtle trade?

The US has led the global tech decoupling narrative with confidence. Export restrictions on AI chips, advanced lithography, and semiconductor manufacturing equipment have been rolled out in phases since 2022. The logic was clear: restrict China’s ability to develop advanced chips by cutting off access to tools, talent, and IP.

But chip design software occupies a special niche. It’s not just a matter of controlling hardware inputs—it’s about owning the rules of system architecture. Without tools like those made by Synopsys and Cadence, hardware development slows to a crawl. The irony? China's chip self-sufficiency push makes these tools even more mission-critical.

By imposing and then easing the software curbs, the US exposed a delicate tension: you can’t simultaneously decouple and dominate the global IP layer without trade-offs. Regulatory muscle needs deal diplomacy. Especially when a US$35 billion merger is on the table.

For Synopsys, the export ban reversal is more than revenue stabilization. It’s a structural signal that deal flow and market access remain intertwined in US-China tech relations. The Ansys deal—already cleared in the US and EU—needs Chinese regulatory approval to close. That approval has now become more plausible.

The implication is clear: the US may be willing to calibrate its hardline tech policy if it preserves leverage over deal timelines and strategic asset flows. Cadence, by association, benefits from the same breathing room. But this isn’t carte blanche. The policy could snap back with little warning.

Meanwhile, in Beijing, the reversal could be read as a sign that American IP firms are not fully aligned with their government’s decoupling agenda. That reading would be inaccurate—but it creates a soft opening for regulators to extract longer-term concessions in exchange for approvals. The larger game is rule-setting. If the West overplays the security angle, it invites a fragmentation of IP standards and accelerates the rise of local alternatives. But if it modulates restrictions tactically—especially around high-profile deals—it preserves both dominance and deniability.

From a regional lens, Europe’s strategic positioning remains consistent: align with US security posture, but maintain industrial competitiveness. EU regulators approved the Synopsys–Ansys deal earlier this year with no significant objections. But the US-China friction around chip software casts a long shadow. European firms—especially in automation and automotive verticals—depend heavily on both Synopsys tools and the Ansys simulation suite. Any threat to software continuity rattles the entire supply chain.

In the Gulf, sovereign investors who’ve backed semiconductor expansion (especially in Abu Dhabi and Saudi Arabia) are alert to this development for different reasons. It highlights how tech regulation—especially from the US—can dictate M&A pathways and recast risk premiums overnight. Software exposure, previously seen as lighter and asset-light, now carries embedded geopolitical volatility.

For fund allocators and sovereign LPs backing frontier tech, this reinforces the need to diversify not just asset classes, but IP jurisdictions.

Synopsys’ bounce is not just about resuming sales to China. It’s about threading the needle between being a toolmaker and a gatekeeper. As semiconductor firms decouple across hardware stacks, software interoperability remains one of the few cross-border dependencies still intact. But that’s changing.

China is investing in homegrown chip design software. The domestic stack is immature—still reliant on US-origin architecture—but growing. Each flare-up of export restriction speeds its development. Eventually, just as China pushed out foreign operating systems and telecom gear, it will look to do the same with chip design environments.

That puts US software firms in a shrinking window of relevance—and leverage. Meanwhile, US policymakers now face a subtler challenge: how to regulate with strategic ambiguity, not just strength. A blanket ban on chip software exports risks fragmentation. A timed easing, however, preserves control—so long as companies remain strategically aligned.

This wasn’t a capitulation. It was a recalibration. The US reversed a narrow export rule not to preserve quarterly earnings, but to regain ground in deal diplomacy. And while Synopsys and Cadence won this round, the clock is ticking on how long American firms can remain both dominant and welcome in foreign tech stacks. This is no longer just about trade compliance. It’s about who gets to set the software rules that shape global compute power. And those rules are now being negotiated one reversal—and one acquisition—at a time.