Baron Funds, an investment management company, released its “Baron Opportunity Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund posted positive results in the third quarter, returning 5.44% (Institutional Shares), but lagged behind the Russell 3000 Growth Index’s (the Benchmark) 10.41% gain and the S&P 500 Index’s 8.12% return. The magnificent seven were the significant contributors to the performance of the benchmark in the second consecutive quarter. The relative underperformance was due to specific stocks, caused by a mix of disappointing results from certain holdings in the portfolio and the strong performance of mega-cap stocks that the fund did not have. Moreover, the letter included a detailed update on AI. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its third-quarter 2025 investor letter, Baron Opportunity 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 -15.30%, and its shares lost 30.76% of their value over the last 52 weeks. On November 19, 2025, Synopsys, Inc. (NASDAQ:SNPS) stock closed at $386.30 per share, with a market capitalization of $71.755 billion.
Baron Opportunity Fund stated the following regarding Synopsys, Inc. (NASDAQ:SNPS) in its third quarter 2025 investor letter:
“Synopsys, Inc. (NASDAQ:SNPS) is a market-leading electronic design automation (EDA) software vendor serving the global semiconductor and systems markets. It operates in a global duopoly with Cadence Design Systems—like Visa and Mastercard in payments—with sizable competitive moats. Synopsys recently closed its acquisition of ANSYS, a long-time Baron investment. This acquisition should enable Synopsys to: (i) strengthen its simulation offering through a fully integrated platform across planning, designing, simulating, and testing chips—increasingly important for helping customers manage complexity and reduce costs; (ii) expand into adjacent markets like automotive and industrials, supporting long-term growth; and (iii) realize substantial cost synergies that will drive operating leverage. With low double-digit organic revenue growth and significant operating leverage from ANSYS synergies, we believe Synopsys can more than double its earnings by 2030.
We initiated a starter position in Synopsys after shares sold off following the company’s third quarter earnings report and our in-person meeting with management. The company disclosed weakness in its intellectual property (IP) business, which represents about 18% of total revenue, causing it to miss consensus expectations and lower full-year guidance. IP weakness stemmed from two primary sources: (i) lower sales to Chinese customers after the U.S. Government banned, then lifted, sales restrictions into China, creating uncertainty that led customers to pause or delay purchases; and (ii) weakness from heightened uncertainty around Intel, the company’s largest customer, which saw reduced demand for its leading-edge fabrication platform and associated Synopsys IP sales. Management’s guidance assumed worst case scenarios for both issues. More importantly, management argued convincingly that both headwinds are temporary, caused by factors outside the company’s control, and neither structural nor due to market share loss. IP remains a long-term secular growth business.
Meanwhile, the rest of Synopsys’ business—both EDA and simulation from the ANSYS acquisition—continues to perform well. Given ever-increasing chip complexity and surging demand from AI, we believe the company is well positioned for steady improvement across its entire business in the coming years.”
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 risk and potential of Synopsys, Inc. (NASDAQ:SNPS) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Synopsys, Inc. (NASDAQ:SNPS) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Synopsys, Inc. (NASDAQ:SNPS) and shared the list of overlooked AI stocks to buy. Aristotle Capital Value Equity Strategy added Synopsys, Inc. (NASDAQ:SNPS) to its portfolio in Q3 2025. 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.
