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Saturday's Bonus Article
Is Synopsys Back from the Dead? EDA Leader Inks Deals With Amazon and OpenAIWritten by Leo Miller. Date Posted: 10/10/2026. 
Key Points
- Synopsys shares have surged more than 30% since September, turning positive for the year after a deal with Amazon and a partnership with OpenAI.
- The company signed an over $1 billion IP licensing deal with Amazon that includes customization fees and royalties under its new application-optimized IP business model.
- Synopsys raised its long-term guidance through fiscal 2030, now targeting mid-teens revenue growth and a 50% adjusted operating margin, up from prior forecasts.
- Special Report: A 20 trillion dollar market could open after Tesla's October reveal
Electronic design automation (EDA) company Synopsys (NASDAQ: SNPS) has recently experienced a resurgence in investor sentiment. Through mid-September, Synopsys shares were down more than 20% year to date (YTD). Since hitting their September low, the shares have surged more than 30%, putting the stock in the green for the year. Several key developments have aided the stock’s recovery, including a more than $1 billion deal with Amazon (NASDAQ: AMZN) and a development deal with OpenAI. These events signal a potential inflection point in the stock’s trajectory, as Synopsys has so far been a chronic underperformer during the AI investment wave. Understanding Synopsys’ Underperformance
Synopsys’ poor 2026 performance has been a microcosm of its longer-term underperformance during the AI investment era. From the beginning of 2023 through its September low, Synopsys shares returned just 15%. The stock’s recent surge lifts this figure to approximately 56%, but that is still far from impressive. Over the same period, the S&P 500 returned approximately 110%, while the S&P 500 tech sector returned around 225%. Synopsys’ underperformance has been driven by several factors. One is weakness at Intel’s (NASDAQ: INTC) Foundry business, which has faced delays and struggled to secure large contracts for its most advanced nodes. This hurts Synopsys’ intellectual property (IP) business because the company invested significantly in developing these chips but receives payment only after customers commit to Intel’s technology. Some investors have also worried that AI tools could eventually replace current EDA tools, hurting demand over the longer term. For Synopsys, its latest developments help address these risks. Synopsys Unlocks New IP Demand With AmazonSynopsys has signed a more than $1 billion deal with Amazon, primarily focused on its IP business. The deal includes a $1 billion license fee that allows Amazon to use Synopsys’ IP across multiple generations of its Graviton, Trainium and Nitro chips. In addition, Synopsys will receive a customization fee and royalties through its new application optimized IP (AoIP) business model. Synopsys’ traditional standards-based IP model includes licensing and nonrecurring engineering fees. With the AoIP model, Synopsys hopes that royalties—payments it receives for each chip produced—will exceed license fees over the long term. This provides considerably more upside for each AoIP agreement. The Amazon deal also helps mitigate weakness at Intel’s Foundry because Amazon is already deploying its custom chips at scale, providing greater certainty around royalty revenue. However, the deal covers future-generation chips, meaning royalties will not begin for more than a year. By fiscal year 2030 (FY2030), Synopsys expects to generate $1 billion in AoIP revenue. Importantly, the company bases this forecast only on current contracts and commitments, implying room for additional long-term upside. The deal demonstrates the importance of Synopsys’ IP for businesses pursuing long-term custom chip road maps. Additionally, the new AoIP model shows that the company is exerting pricing power through customization and royalties, which is a strong positive signal. OpenAI and Synopsys Partner to Accelerate Chip DevelopmentThe company’s deal with OpenAI also has significant implications. Together, the two firms will develop GPT-Synopsys, “a specialized model for chip design that brings together OpenAI's frontier AI with Synopsys' trusted EDA tools and chip design expertise.” Essentially, the companies will train a model capable of operating Synopsys’ EDA tools, thereby accelerating the chip development process. This is important because chip design involves running numerous experiments and iterating until engineers find the best design. This creates a bottleneck because humans can run only so many experiments at once. By allowing engineers to autonomously explore a much wider range of designs, OpenAI co-founder Greg Brockman argues that companies can shave weeks or months off the design process. Synopsys argues that this will expand its total addressable market because AI will use more of its EDA tools. It could also accelerate the company’s IP business, as companies bring newer chips into production faster. The deal directly pushes back on the idea that AI models will displace EDA tools, as OpenAI itself clearly sees a need to leverage Synopsys’ expertise. Synopsys Raises Outlook After Finding New Growth VectorsAmid these developments, Synopsys significantly raised its long-term guidance. Through FY2030, it now expects revenue to increase at a mid-teens compound annual growth rate, up from its previous “double digits” guidance. The firm also targets an adjusted operating margin of 50% by FY2030, a significant improvement from its prior expectation in the mid-40% range. This implies substantial expansion over the coming years, with Synopsys guiding for a 41.5% adjusted operating margin in fiscal year 2026. Synopsys’ deal with Amazon and its partnership with OpenAI represent two new ways the company can benefit from AI development. Looking ahead to 2027, it will be important to monitor whether Synopsys sees an uptick in EDA growth through the OpenAI deal and whether it can secure more large AoIP customers outside Amazon. If the company continues to gain momentum in these areas, it could provide considerable tailwinds for its financials and share price. . |
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