Synopsys (NASDAQ:SNPS) is having a week worth watching. The chip design software leader posted a 2.39% gain over the past five trading days, climbing from $426.88 to $437.09. Year to date, Synopsys is down 6.95%, and over the past month, shares have dropped 13.51%.
That sounds like poor performance, but Synopsys is performing much better than peers in the software space, as a brutal sell-off has led to many popular stocks down 30% or more year to date. Let’s dive into some of the biggest storylines that impacted Synposys this week.
Performance: Outpacing Software, Lagging Semiconductors
Synopsys’s 2.39% weekly gain looks solid compared to the broader software sector, which posted just 0.33% over the same period. But semiconductors climbed 1.76% this week, and year to date, the semiconductor ETF is up 17.77% while Synopsys has bled value. The divergence is striking. Synopsys builds the tools that design the chips everyone wants, yet it’s trading like a software company in a sector-wide selloff rather than a semiconductor play riding the AI wave.
Storyline 1: Design IP Weakness and China Headwinds
The Design IP segment is the biggest anchor weighing on Synopsys’ share price over the past six months. Revenue hit $1.75 billion in fiscal 2025, down 8% year over year. CEO Sassine Ghazi laid out the challenges: “Foundry customer uptake challenges, China restrictions impact, custom IP delivery delays.” The company expects “muted growth in the low-to-mid single digit range” for fiscal 2026, calling it a “transitional year.”
China revenue dropped 18% in fiscal 2025, with no improvement expected near term. That’s a structural headwind that will take time to work through.
Storyline 2: NVIDIA’s $2 Billion Vote of Confidence
NVIDIA Corporation (NASDAQ:NVDA | NVDA Price Prediction) invested $2 billion in Synopsys at $414.79 per share. That’s a strategic partnership. Ghazi explained the three-part collaboration: “GPU acceleration of Synopsys products, Omniverse integration for intelligent systems using ANSYS multiphysics simulation, and go-to-market reach leveraging ANSYS’s channel partnerships.” Jensen Huang doesn’t write $2 billion checks lightly. His endorsement carries weight: “I want to endorse it with an investment because I know we can make money.” The investment accelerates debt repayment and is accretive to fiscal 2026 earnings per share. It positions Synopsys at the center of AI chip design infrastructure.
One important piece of news that happened on February 4th was Huang calling the software sell-off “illogical.”
As Huang said, “If you were a human or robot, artificial, general robotics, would you use tools or reinvent tools? The answer, obviously, is to use tools … That’s why the latest breakthroughs in AI are about tool use, because the tools are designed to be explicit.”
While the market frets that AI will disrupt Synopsys, keep in mind it also makes the company’s software much more capable as well.
Storyline 3: Ansys Integration and Margin Expansion
The Ansys acquisition transformed Synopsys from an EDA leader to what Ghazi calls “the leader in engineering solutions from silicon to systems.” Ansys contributed $668 million in Q4 fiscal 2025 and is expected to deliver $2.9 billion in fiscal 2026 with double-digit growth. The company is executing a 10% workforce reduction to accelerate cost synergies, targeting 40.5% non-GAAP operating margin in fiscal 2026, up from 37.3%. That’s 320 basis points of expansion in one year.
This week’s gain doesn’t erase the damage Synposys has seen across the software sell-off, but it shows the market is separating Synopsys’s fundamental story from the broader software panic. The company’s Design IP weakness is real and will weigh on fiscal 2026. But NVIDIA’s investment and the Ansys integration position Synopsys as infrastructure for the AI chip design cycle.
If AI infrastructure spending continues, Synopsys is the toll bridge every chip designer has to cross.
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