Shares of Synopsys (SNPS) are jumping after the company reported better-than-expected results and raised its full-year guidance on Wednesday. Synopsys CEO Sassine Ghazi joins Market Domination to discuss the company’s work with Nvidia (NVDA) and its acquisition of Ansys (ANSS) and the broader AI moment.
Ghazi explains that the quarter’s “strong performance” was driven by two segments of the company’s portfolio: design automation, or the software used by chip designers like NVDA to make chips, and design IP, the prepackaged “Lego blocks ” of chip design used by chip developers and hyperscalers.
Like Nvidia CEO Jensen Huang, Ghazi believes the “next industrial revolution” is here, but is still in its “early stages.” The first step is building out the infrastructure, including the computing requirements, he says. The second phase, “which you could call the industrial revolution, is when all systems become intelligent systems,” the CEO tells Yahoo Finance.
Ghazi adds that some of the company’s revenue can be directly attributed to AI. He notes that Synopsys began selling AI embedded in software in 2020, which has contributed to a “20% increase” in the areas where customers use AI.
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This article was written by Gabriel Roy.
Video transcription
The stocks that jumped after that company reported better-than-estimated second-quarter results and raised full-year expectations.
Joining us now Sin Ghazi Synopsis, CEO C. Good to see you.
Thanks for being here.
Nice to see you Julie.
So there’s clearly a lot of excitement around the broader chip space right now. Of course, you recently announced that you were working with NVIDIA, even though you already had relationships with them.
Um. What do you really think would be the element(s) driving your numbers this quarter?
Yes, we are seeing strong performance across the portfolio.
Remember, we have two parts of the wallet.
We have the design automation, the software used by the chip designers to design their chips.
So when Jensen says synopsis is crucial to their development, they use our software to design the chip.
The other part of our portfolio is design I, which you should think of as part of the chip-like Lego blocks of the chip design, for which we have pre-packaged them and reuse them by the chip developers or the semiconductor industry or hyperscalar for It doesn’t matter that they make their own chips develop, they use Synopsis’ software and IP address.
So the power came from both segments.
So it was interesting to hear Jensen talk about the AI moment we’re in and it was actually just the language he used in the scene.
He said we have started the next industrial revolution.
He said, I’m just curious, is, is, is that, the way you see it, it’s a scene where we’re really in these kind of historical moments.
Here?
I do that, but at the same time I believe that we are in that early phase, that first phase is building out the infrastructure, the AI creates a huge computing need.
And you see most of these investments in data centers happening for obvious reasons.
Then the second part is the networking to connect these data centers and these chips.
The second phase, as you can call it, the industrial revolution will happen when all systems become intelligent systems, which means your car becomes more intelligent, your house becomes more intelligent, which means they are both from an inference and connected to the data center or on internet. the edge for computing.
And Cecin, I know I ask you this every quarter, but we keep talking about it step by step when you say you’re just at the beginning of the AI revolution, especially when it comes to you guys.
What are we seeing that you can directly attribute revenue to AI right now?
And since the shareholders just approved your acquisition of A, assuming it still goes through and gets regulatory approval, how much will that grow the AI business as well?
Yeah, so what I’m saying, it’s still early stages.
I’m talking about the early stage of the overall market.
If you look at the data center consumption of building out the computer, intelligence system, etc., as a software provider, we started selling our AI embedded in our software in 2020.
So we have been in that cycle for four years and now we can communicate with our investor that he is contributing about 20% of the increase in the domains where the customers are using AI four.
So we are already seeing the benefit and the very rapid pace at which the technology is being adopted.
But to give you an idea, we’re only about 20%.
You can argue that 20% is too high for AI in terms of adoption, but it is growing very well.
So we’re already seeing that value in driving our software revenue using AI and Cinna O on that question, acquiring answers.
Where are we in the regulatory approval process?
So about four or five weeks after we announced the acquisition, we started the process.
So with the FTC, we’re in phase two, with the CM that we filed in April and we’re going through the process with China. The first phase or step was to communicate that we are below the merger threshold, the threshold for filing a merger.
And last week, China confirmed that we are below the threshold, but still showed interest in reviewing the deal.
We are still aiming for the first half of 25.
And actually, we feel like this process should be manageable to a positive conclusion.
Finally, Cine, I wanted to ask you about the broader corporate spending environment right now, right?
Looking at your results, you wouldn’t know there are questions about economic growth.
But I’m curious to hear what you hear from customers, whether there are any changes they are making at the margin.
So if you zoom out and look at market segments, obviously anything related to AI, our customers are investing and increasing their R&D capabilities.
The second segment that is actually quite exciting and that we talked about in our second quarter report is the automotive sector.
We’ve seen the need, whether that’s the case or not, to make the car more autonomous, which means more infotainment, a kind of in-car application that requires more advanced chips.
The third market where we’re seeing early interest in going deeper into the electrical sector is anything industrial to get back to more intelligent industrial production and systems.
There is a conversation now, but I will contribute to it in four or five years.
Is everything related to life sciences.
So that’s where we see the overall landscape and of course anything that’s hyperscale is driving significant growth as AI CIN builds out.
It was great to have you on the show today.
Thank you for taking the time to join us.
Thank you.
Thanks for letting me be here.