This little-known chip stock benefits from AI, Bank of America says

Investors may want to keep an eye on a chip design stock that’s poised to benefit from ongoing artificial intelligence tailwinds, according to Bank of America. Analyst Vivek Arya reiterated his buy rating and lifted estimates on Synopsys in a report on Thursday, citing ongoing electronic design automation momentum and a steady AI product ramp. SNPS YTD mountain Shares over the last year “Overall, we believe SNPS remains a key beneficiary of rising semi complexity led by AI and increased chip design activity by an expanding set of customers,” he wrote. Shares of the semiconductor stock have added 28% over the past year, outperforming the S & P 500 by half a percentage point, as Wall Street stepped up bets on potential AI winners. Arya expects Synopsys’ core business to see low double-digit growth through 2025 as companies allocate more research and development dollars to semiconductor spending. Shares should also gain from a “healthy” $7.9 billion backlog as chip design starts accelerate and AI products roll out. “AI products (VSO.ai) introduce another monetization lever which is delivering a +20% uplift to contracts where adoption remains in early days,” he added. Arya reiterated his $650 price objective, implying 15% upside from Wednesday’s close, and raised revenue estimates for 2025 and 2026 by 5% and 6%, respectively. Operating profit margins should also expand to 40% by the second half of 2025. Arya added that closure of the company’s $35-billion deal to buy graphics software maker Ansys could unlock a $31-billion total addressable market and $400 million in “potential revenue synergies.”