How Synopsys Is on Fire With New Amazon and AI Tie Ups

Synopsys stock has been broadly flat over the past three months. (David Paul Morris/Bloomberg)

Key Points

• Synopsys partnered with OpenAI to launch GPT-Synopsys, a specialized model for chip design, under a multiyear revenue-sharing agreement.
• Synopsys agreed to a deal worth more than $1 billion to work with Amazon on custom chips, expanding Amazon’s use of its software and IP.
• Synopsys raised its long-term financial targets, now aiming for midteens compound annual revenue growth through fiscal year 2030.

Synopsys is aiming to convince the market that it’s a winner from artificial-intelligence. Bringing OpenAI and Amazon on side is a pretty good step for the chip-design software company.

Synopsys shares were up 3.5% at $450.08 in Thursday’s premarket, adding to a 4.8% gain the previous day when the company held an investor event.

The most eye-catching of the company’s announcements were its AI partnerships. Synopsys and OpenAI have partnered to launch GPT-Synopsys, a specialized model for chip design. Although the two companies didn’t give financial details, they said they would share revenue under a “multiyear agreement” and they are already in talks with leading semiconductor customers over its use.

Meanwhile, Synopsys also said it had agreed a deal worth more than $1 billion to work with Amazon on custom chips. The agreement expands Amazon’s current use of Synopsys’ intellectual property and its electronic-design automation software.

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Together the two agreements should help tackle one of the major concerns around Synopsys, which is that AI would allow its customers to do more of the chip design work themselves and potentially cut into the company’s business. That has contributed to the stock’s 7.4% fall this year so far coming into Thursday’s session. Its peer Cadence Design Systems has risen 5.6% over the same period.

“AI agents for design tools should result in revenue acceleration for Cadence and Synopsys specifically as these tools allow users to save on human costs (e.g., electrical engineers can be more efficient at their job),” wrote StoneX Financial analyst Gary Mobley in a research note.

Mobley has a Buy rating and $570 target price on Synopsys stock.

On top of the partnerships, Synopsys also raised its long-term financial targets, now saying it targets midteens compound annual revenue growth through fiscal year 2030, from double-digit growth previously. For fiscal year 2027, the company expects revenue growth of around 15%.

Write to Adam Clark at adam.clark@barrons.com

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