Synopsys CEO: We're already seeing benefit of rapid AI adoption

Synopsys (SNPS) shares 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 acquisition of Ansys (ANSS), and the broader AI moment.

Ghazi explains that the quarter's "strong performance" was owed to two segments of the company's portfolio: design automation, or the software used by chip designers like NVDA to create 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 in its "early phase." The first step is building out infrastructure, including the computing requirement, 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% uplift" in the domains where customers are using AI.

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This article was written by Gabriel Roy.

Video transcript

Synopsis shares jumping after that company reported better than estimated second quarter results and raised its full year guidance.

Joining us now Sin Ghazi Synopsis, Ceo C. Good to see you.

Thanks for being here.

Great to see you Julie.

So obviously a lot of excitement around broader chip space right now, you guys of course recently announced that you were working with NVIDIA, although you already had relationships with them.

Um What what would you say was really the element or elements powering your numbers this quarter?

Yeah, we're we're seeing strong performance across the portfolio.

Remember we have two parts of the portfolio.

We have the design automation which is the software used by the chip designers to design their chips.

So when Jensen talks about synopsis as mission critical to their development, that's where they use our software to design the chip.

The other part of our portfolio is design I which you need to think of it as part of the chip like lego blocks of the chip design that we have them pre packaged and again used by either the chip developers or the semiconductor industry or hyper scalar for that matter that they are developing their own chips, they use the software and the IP from Synopsis.

So the strength was driven by both segments.

So it was interesting to hear Jensen sort of talk about the A I moment we find ourselves in and it kind of just the language he used the scene.

He said we are the, the next industrial revolution has begun.

He said, I'm just curious is, is, is that how you see it's a scene that we really are in this sort of historic moment.

Here?

I do, I do but I believe at the same time, we are in that early phase, that first phase is building out the infrastructure, the A I is driving a massive compute requirement.

And you see most of these investments happening in data center for the obvious reasons.

Then the second part is the networking to connect these data centers and these chips together.

The second phase where you can call it, the industrial revolution is going to happen when all systems become intelligent systems, meaning your car become more intelligent, your home, more intelligent, meaning connected both from an inference and connected to the data center or on the edge for compute.

And Cecin, I know I ask you this every quarter, but we keep talking about sort of incrementally when you say you're early in that A I revolution, especially as it pertains to you guys.

What are we seeing that you can directly attribute revenue wise to A I right now.

And also since shareholders just approved your acquisition of A, assuming that still goes off, gets regulatory approval, how much will that grow the A I business as well?

Yeah, so what I'm saying, it's still early phase.

I'm talking about the early phase of the overall market.

When you look at the data center consumption of building out the compute the intelligence system, etcetera, we uh as, as a software provider, we started selling our A I embedded in our software in 2020.

So we've been four years into that cycle and now we are able to communicate to our investor that is contributing about 20% uplift in the domains where the customers are using A I four.

So we're already seeing the benefit and a very rapid pace of adoption of the technology.

But to give you a sense, we are only about 20%.

Now, you can argue 20% is too high for A I in terms of adoption, but it's, it's growing uh very nicely.

So we're already seeing that value already uh from our software monetization using A I and Cinna O on that question, the acquisition um of answers.

Where are we there in the process of seeing in terms of regulatory approvals?

So about four or five weeks after we announced the acquisition, we started the process.

So with the FTC, we're into phase two, with the CM we filed in April and we are going through the process with China, the first phase or step was to communicate that we are below the merger threshold, the merger filing threshold.

And last week, China confirmed that we are below the threshold but still expressed interest in reviewing the deal.

We are still targeting the first half of 25.

And actually, we are feeling that this process should be manageable to a positive close.

Finally, Cine I wanted to ask you sort of about the about the broader corporate spending environment right now, right?

You wouldn't know that there were any questions about economic growth, looking at your results.

But I'm curious what you are hearing from clients, if there are any changes that they are making at the margin.

So if you zoom out and look at market segments, of course, anything related to A I, our customers are investing and ramping up their R and D capability.

The second segment that is actually fairly exciting and we talked about it in our Q two report is automotive, automotive.

We have seen push and the need regardless if it is or not, but to make the car more autonomous, meaning more infotainment, a type of application inside the car that requires more sophisticated chips.

The third market that we are seeing that early interest in going deeper into electric is anything industrial to go back to a more intelligent industrial manufacturing and systems.

Now there is a talk but I'll contribute it to be more four or five years out.

Is anything around life sciences.

So that's where we are seeing the general landscape and of course, anything hyperscale, it's driving significant growth due to the build out of A I CIN.

It was great to have you on the show today.

Thanks so much for taking the time to join us.

Thank you.

Thank you for having me.