2024-01-22 05:20:00 ET
As the artificial intelligence (AI) race heats up, investors have become increasingly aware of the powerful position of electronic design automation (EDA) software companies. That's because these companies deal with a type of design suite specifically for semiconductors that are so vital to AI's development. As a result, industry leaders Synopsys (NASDAQ: SNPS) and Cadence Design Systems (NASDAQ: CDNS) have been off to the races, sporting respective gains of 59% and 71% since the start of 2023.
Synopsys stock has fallen as of late, though, on rumors it would try to acquire Ansys (NASDAQ: ANSS) , which produces software that analyzes and simulates engineered parts and systems before they're manufactured. Synopsys confirmed the rumor in late December and is offering to acquire Ansys for $35 billion. If successful, this will be one of the largest-ever tech mergers and acquisitions in a big bet on the future of AI. But investors should be aware of some important details before even considering buying right now.
On the surface, a tie-up between Synopsys and Ansys may look confusing. After all, Synopsys is a high-tech software business catering primarily to semiconductor companies and other businesses that design and assemble computing systems with chips. Ansys, by comparison, only counts about one-third of its revenue from semiconductor and computing customers. Its simulation software is primarily used for mechanical processes, not electrical ones.
For further details see:
2 Software Stocks Are Merging to Bet On AI -- but Investors, Beware of the Hype