Synopsys, Cadence Design Systems to benefit from AI tailwinds – BofA

BofA analysts raised the firm’s price targets on Synopsys (NASDAQ:) to $500 from $430 and Cadence Design Systems (NASDAQ:) to $260 from $240 in a note to clients on Thursday.

The analysts said the firm is raising the price targets on the EDA vendors based on artificial intelligence (AI) tailwinds and cyclical resilience.

SNPS was raised “given blend of cyclical resilience and AI tailwinds, seen in discussion with CFO Shelagh Glaser,” they wrote. “EDA CAGR accelerating (7%-8% to mid-teens), possibly sustainable with new AI tools. Synopsys.ai tools (DSO.ai, TSO.ai, VSO.ai) drive automation for design/verification/test tasks, increasing efficiency without growing headcount.”

“AI tool attach rate in infancy (low-single digits, ordered per project basis), but traction growing (DSO.ai commercial tape-outs 200, 2x QoQ). Customer engagements also bolstered by software integrity and IP portfolios (2nd largest in industry), but dilutive to margin,” they added.

CDNS is “another beneficiary of EDA acceleration,” the analysts stated.