Investing.com -- Benchmark initiated coverage of electronic design automation (EDA) software leaders Synopsys and Cadence Design Systems with Buy ratings, citing strong long-term demand driven by artificial intelligence, semiconductor design complexity and resilient industry fundamentals.

The brokerage assigned a $570 price target on Synopsys, implying meaningful upside from its recent trading price, and a $450 price target on Cadence. Benchmark said the EDA industry benefits from a duopoly market structure with high barriers to entry, strong pricing power and expanding demand as AI increases the complexity of chip and system design.

For Synopsys, Benchmark expects AI-powered design tools, simulation software and intellectual property offerings to drive faster growth as customers seek productivity gains. The firm believes the company is well positioned to capture a larger share of semiconductor research and development spending and sees opportunities for revenue acceleration from agentic AI, new IP products, and synergies from the Ansys acquisition. It also expects management to raise fiscal 2026 guidance later this year as industry conditions remain favorable.

Benchmark forecasts Synopsys to generate fiscal 2026 revenue of $9.66 billion and non-GAAP earnings per share of $14.76, with operating margin improving to 41%. It expects annual revenue synergies from the Ansys combination to eventually reach $1 billion, while stronger free cash flow should allow the company to reduce debt and resume tuck-in acquisitions over time.

On Cadence, Benchmark said the company remains the preferred EDA name due to its strong execution, broad product portfolio and premium positioning in AI-enabled design software. The brokerage expects continued momentum in hardware verification, semiconductor IP and simulation tools, supported by robust chip design activity and expanding adoption among hyperscalers and system companies developing custom silicon.

Benchmark projects Cadence will deliver 16.6% revenue growth in fiscal 2026, with non-GAAP operating margin of 44% and EPS of $7.90, while expecting the company to raise its annual outlook when it reports second-quarter results later this month.