Nvidia (NVDA) is sure to come up in any discussion of the best artificial intelligence stocks to watch. But don’t ignore Synopsys (SNPS), a key Nvidia partner. After already earning a spot on the IBD Long-Term Leaders list with a 3,594% run from a low in 2008 through the end of last year, shares of Synopsys stock stand poised to pop into a new buy zone — if the market cooperates.
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Synopsys also joins Nvidia stock on the IBD 50, IBD Big Cap 20 and the IBD Breakout Stocks Index. Both AI leaders sport the highest-possible 99 Composite Rating.
Like with Nvidia, robust demand for all things AI has driven strong institutional demand for Synopsys. In addition to a solid B Accumulation/Distribution Rating, 52 funds with an A+ rating from IBD have own shares of Synopsys stock.
While it did not join Nvidia on the list of the best 100 stocks of 2023, Synopsys generated a 65% gain last year. And although Nvidia has climbed beyond buy range, Synopsys continues to set up a new potential breakout.
See Who Joins Synopsys And Nvidia On The IBD Breakout Stocks Index
AI Megatrends Drive Synopsys To Acquire Ansys
Based in Sunnyvale, Calif., Synopsys provides software and systems designed to simulate and verify semiconductor designs and prototypes. It provides software for self-driving cars and machines that learn, as well as communications and data transfer needed to enable cloud-based apps.
In addition to Nvidia, Synopsys works with key players in the semiconductor industry, including Taiwan Semiconductor (TSM), Arm Holdings (ARM), Intel (INTC), Samsung and more.
Earlier this month, Synopsys announced it will acquire Ansys (ANSS), which develops engineering simulation software applications for design analysis and prototype assessment.
The deal aims to address the megatrends of AI, silicon proliferation and increasingly complex software-defined systems. Synopsys valued the buyout at approximately $35 billion, based on the closing price of Synopsys common stock on Dec. 21.
Synopsys Stock Etches Handle As Nvidia Remains Near Record High
With its relative strength line soaring, Nvidia stock has cleared the 600 mark as it continues to trade right around record highs.
Meanwhile, Synopsys stock has crafted a second-stage cup with handle. The buy point is 554.57.
While forming the right side of that base this month, note how the stock posted several up days in heavy volume. Such action points to demand. Synopsys is down Wednesday as the Nasdaq pulls back, but it remains above its 50-day moving average.
On Wednesday, both Synopsys and Nvidia have shown resilience, coming off their intraday lows.
Synopsys faces its next earnings test on Feb. 21.
The stock hit record highs after beating estimates for its fiscal fourth quarter on Nov. 29. Marking a second quarter of accelerating growth, Synopsys posted $3.17 earnings per share, a 66% jump over the prior-year quarter. Revenue rose 25% to just under $1.6 billion. That marked a third quarter of acceleration.
For the current quarter, Synopsys stock analysts forecast 39% earnings growth leading to an 83% gain for the full year.
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Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
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