Bank of America makes a surprise call on Nvidia backed stock

Core Viewpoint - The fear of an artificial intelligence bubble is leading some investors to seek safer investments outside of AI, while Synopsys presents a compelling option as a lower beta, AI-levered stock with strong growth potential [1]. Group 1: Earnings Highlights - Synopsys reported Q4 2025 revenue of $2.255 billion, a significant increase from $1.635 billion in Q4 2024 [3][6]. - The company anticipates fiscal year 2026 revenue of $9.610 billion at the midpoint, which includes $2.9 billion from expected Ansys revenue and accounts for a $110 million impact from divested businesses [2]. Group 2: Analyst Insights - Bank of America upgraded Synopsys stock from neutral to buy, raising the target price from $500 to $560 based on a 32x price-to-earnings ratio for 2027 [7]. - Analysts noted that the non-GAAP EPS guidance for fiscal year 2026 is $14.36 at the midpoint, exceeding the consensus estimate of $14.11, indicating strong growth potential [4]. Group 3: Financial Metrics - Gross margin for Q4 2025 was $1.6 billion, up from $1.26 billion in Q4 2024 [6]. - Net income attributed to Synopsys was $448.696 million, a decrease from $1.114 billion in Q4 2024, with diluted net income per share at $2.39 compared to $7.14 in Q4 2024 [6]. Group 4: Market Position and Strategy - Analysts believe that the derisking of China and Intel sales, along with strong growth at Ansys, positions Synopsys for attractive stock catch-up potential and EPS beats in the coming year [4]. - The stock is viewed as an attractive, lower-beta, AI-levered candidate with recurring sales linked to resilient chip design and R&D spending [5].