An unprecedented level of semiconductor design activity, boosted by demand for artificial intelligence chips, is driving growth at chip design firm Synopsys. Synopsys stock is trading near its record regular-session closing price.
"We build the tools that allow people to build the leading-edge chips," Synopsys Chief Financial Officer Shelagh Glaser told Investor's Business Daily.
Business is strong at Synopsys, which just delivered better-than-expected fiscal second-quarter results and guidance.
"I don't think I've ever seen the level of design activity that we're seeing right now," Glaser said. "And it's not just (AI chip leader) Nvidia, it's the hyperscalers (major cloud service providers)."
She added, "And we've seen over the last few quarters that the hyperscalers aren't just building one chip. They're building multiple chips. And everyone is racing to catch up with them."
Synopsys Stock Rises After Earnings Report
On the stock market today, Synopsys stock rose 0.2% to close at 587.40. That is just below its top closing price of 602.01, reached on March 21.
Synopsys stock notched its all-time high of 629.38 in intraday trading on Feb. 22 after its fiscal first quarter report.
Combined with the heightened design activity are increasing chip complexity, smaller production nodes and rapidly changing connectivity protocols and other standards, she said.
"More design starts and more chip starts is good business for us both in design automation and design IP," Glaser said.
Synopsys has two business segments. The design automation business includes advanced silicon design, systems integration, verification and other tools. The design IP business includes intellectual property that forms the building blocks of semiconductor design.
"For us, the R&D engine goes 24-7, especially in this part of the industry, where you can't miss a beat," Glaser said. "We have been really laser-focused on executing, and we're building strong momentum into the year."
SNPS Stock Gets Price-Target Hikes
At least five Wall Street firms raised their price targets on Synopsys stock after the company's fiscal Q2 report late Wednesday.
"Demand for chip design software tools remains strong as expected and is reflected in Synopsys's solid April-quarter results and July-quarter guidance and overall commentary," JPMorgan analyst Harlan Sur said in a client note Thursday. He reiterated his overweight rating on Synopsys stock and upped his price target to 655 from 650.
Synopsys stock has been consolidating for the past 13 weeks at a buy point of 629.38, IBD MarketSurge charts show.
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