Bank of America has upgraded Synopsys (SNPS) to a 'lower-beta AI play' with significant catch-up potential, citing its strong position in semiconductor design tools and underappreciated AI-driven growth. The firm highlights SNPS's resilience and long-term value in an AI-dominated tech landscape.
- Synopsys (SNPS) was upgraded by Bank of America as a lower-beta AI play
- Q3 revenue reached $1.18 billion, up 12% YoY
- Non-GAAP operating margins exceed 45%
- Stock beta of 0.85 indicates lower volatility than market average
- Price target raised to $720, implying 14% upside
- Core business in EDA tools critical for AI chip development
Bank of America has issued a bullish note on Synopsys (SNPS), positioning the semiconductor software leader as a lower-beta exposure to the artificial intelligence boom. The firm argues that despite the sector’s recent rally, Synopsys remains undervalued relative to its peers and AI integration trajectory. The recommendation underscores SNPS’s role in enabling next-generation chip design, a critical link in the AI hardware supply chain. The firm’s analysis points to Synopsys’ expanding market share in electronic design automation (EDA) tools, which are essential for developing advanced AI accelerators and high-performance computing chips. In the most recent fiscal quarter, SNPS reported revenue of $1.18 billion, up 12% year-over-year, with non-GAAP operating margins exceeding 45%. These figures reflect strong pricing power and recurring revenue stability, key attributes in a volatile market. Despite its consistent performance, SNPS has underperformed the broader tech index over the past 12 months, with a beta of 0.85—below the market average—suggesting lower volatility and potential defensive appeal during market fluctuations. Bank of America believes that as AI infrastructure demand accelerates, Synopsys is poised for re-rating, with potential upside to a price target of $720, implying a 14% increase from current levels. The move is expected to attract capital from growth and value investors alike, particularly those seeking AI exposure with reduced volatility. Institutions and ETFs with EDA or semiconductor allocations may reassess their weighting in SNPS, reinforcing its profile as a foundational play in the AI supply chain.