HSBC moved Synopsys (SNPS) from Buy to Hold on Thursday, assigning a new price objective of $455.00 and framing fiscal 2026 as a transition year for the company. The downgrade rests on a mix of geopolitical headwinds and uncertainties linked to Intel's foundry-related activity, risks HSBC says will pressure Synopsys' core Electronic Design Automation (EDA) business.
The EDA segment represented more than 60% of Synopsys' total revenue in fiscal 2025, according to the firm cited by HSBC. With that concentration, HSBC sees potential near-term disruption and a lack of clear catalysts that justified trimming its recommendation.
HSBC analyst Stephen Bersey commented on the outlook, stating: "We expect FY26e to be a transition year for Synopsys as it battles geopolitical and Intel foundry-related uncertainties in its Electronic Design Automation (EDA) business, which contributed 60%-plus to overall revenue in FY25."
Market observers have already started to price the company for a more cautious near-term profile. The stock has dropped 26% over the past six months and currently trades at a P/E ratio of 54.92. A valuation analysis flagged the shares as trading above fair value and placed the name among companies on a Most Overvalued list. That commentary also noted the availability of additional tips and expanded research resources for investors ahead of Synopsys' next earnings release in five days.
HSBC highlighted that revenue growth in Synopsys' Design IP business may fall short of the company's long-term mid-teens growth target as management shifts its IP lineup toward AI-driven opportunities. That pivot, while strategic, is expected to produce muted near-term revenue expansion relative to the longer-term guidance.
Despite HSBC's caution, several other major brokers and strategic developments have altered the market picture in recent weeks. NVIDIA revealed a substantial purchase of Synopsys shares, acquiring 4.82 million shares with a reported value in excess of $2 billion, making the buyer one of Synopsys' largest shareholders. In addition, Synopsys disclosed an agreement to sell its Processor IP Solutions business to GlobalFoundries, a deal that includes ARC-V and ARC CPU IP technologies.
Analysts have been actively revising their targets and recommendations. Morgan Stanley raised its price target to $550, citing EDA demand as a growth driver. KeyBanc increased its target to $600 and pointed to a stronger-than-expected fourth-quarter revenue print plus a backlog of $11.4 billion. BofA Securities upgraded Synopsys from Neutral to Buy and lifted its price target to $560, citing potential EPS improvements and lower risk in particular sales channels.
The constellation of a large strategic investor, a divestiture of processor IP assets, and diverging analyst views underscores the strategic and financial adjustments underway at Synopsys. HSBC's downgrade centers on the immediate uncertainty and limited visible catalysts, while other firms have taken more upbeat stances based on backlog strength and anticipated demand for electronic design automation tools.
Context and outlook
HSBC's move frames FY26 as a period of repositioning rather than acceleration. For investors and market participants focused on the semiconductor software and IP supply chain, the key variables to monitor will be developments around foundry partnerships, geopolitics affecting EDA demand, and the pace at which Synopsys converts its IP pivot into measurable revenue growth.