What Makes Synopsys (SNPS) an Attractive Investment Bet?

Bristlemoon Capital, a global equities firm, released its “Bristlemoon Global Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned 5.0% in the September quarter, 5.6% for September 2025, net of fees. Since its inception, the fund has produced a cumulative return of 19.3%, net of fees. The fund focuses on compounding the capital at attractive rates over the long term. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Bristlemoon Global Fund highlighted stocks such as Synopsys, Inc. (NASDAQ:SNPS). Synopsys, Inc. (NASDAQ:SNPS) offers electronic design automation software products used to design and test integrated circuits. The one-month return of Synopsys, Inc. (NASDAQ:SNPS) was 4.70%, and its shares lost 19.53% of their value over the last 52 weeks. On October 10, 2025, Synopsys, Inc. (NASDAQ:SNPS) stock closed at $438.92 per share, with a market capitalization of $81.529 billion.

Bristlemoon Global Fund stated the following regarding Synopsys, Inc. (NASDAQ:SNPS) in its third quarter 2025 investor letter:

"Synopsys, Inc. (NASDAQ:SNPS) is the leading vendor of electronic design automation (EDA) software tools used for integrated circuit design, and the #2 licensor of chip design IP. EDA tools are mission critical for anyone who wants to design chips – from Nvidia and Analog Devices to Apple and Alibaba. The EDA market is a stable oligopoly between market leaders Synopsys and Cadence Design Systems, with Siemens (formerly Mentor Graphics) a distant third place.

As a “picks and shovels” vendor of chip design tools and IP, Synopsys benefits from an increasing number of design starts especially at the leading edge (note our comment above regarding record TSMC N2 tape-outs), and is a second order beneficiary of all the hyperscalers pursuing custom ASICs to reduce their dependence on Nvidia GPUs.

We have followed Synopsys for several years but never found the valuation to be compelling enough for the earnings growth on offer. However, an opportunity arose following the company’s FQ3 2025 results when the stock collapsed -36% because of a miss and guide-down in the IP segment. The IP segment is c.30% of total revenue and has historically generated lower operating margins than the core EDA segment due to the high fixed cost of R&D to design the IP. The IP weakness was attributed to the temporary US EDA export restrictions placed on China in late May and subsequently lifted in early July, plus ongoing challenges at Intel’s foundry business which Synopsys supports via IP for Intel 18A (Intel is a common source of headaches for its suppliers…)…” (Click here to read the full text)

Synopsys, Inc. (NASDAQ:SNPS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 66 hedge fund portfolios held Synopsys, Inc. (NASDAQ:SNPS) at the end of the second quarter, compared to 67 in the previous quarter.  While we acknowledge the potential of Synopsys, Inc. (NASDAQ:SNPS) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Synopsys, Inc. (NASDAQ:SNPS) and shared the list of stocks Jim Cramer discussed. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.