Keysight Technologies: A Hidden Gem Poised to Dominate Semiconductor Design Tools

The recent FTC-mandated divestiture of critical semiconductor design tools from Synopsys and Ansys has handed Keysight Technologies (KEYS) a golden opportunity to seize market leadership. This strategic acquisition positions Keysight to dominate high-growth segments of the semiconductor industry, yet its stock remains undervalued relative to its transformative potential. Investors who act now could capitalize on this underappreciated opportunity before the market catches on.

The Divestiture Deal: A Game-Changer for Keysight

The FTC's order forced Synopsys and Ansys to divest assets critical to semiconductor design, including:
- Synopsys' optical software tools: Used for designing LED screens, lenses, and mirrors.
- Synopsys' photonic tools: Vital for fiber optics and solar panel development.
- Ansys' PowerArtist: An RTL power analysis platform for optimizing chip energy efficiency.

These assets now empower Keysight to offer end-to-end solutions for semiconductor design, simulation, and testing—a rare capability in the fragmented EDA (Electronic Design Automation) market. By integrating these tools into its existing test-and-measurement offerings, Keysight can lock in long-term contracts with chipmakers, foundries, and automotive innovators.

Why the Market Hasn't Fully Priced This In

Despite its strategic advantages, Keysight's valuation metrics still suggest undervaluation:

- P/E Ratio: 37.23 (TTM) vs. the US Electronic Industry's 22.1x average.
- Forward P/E: 21.91, implying growth is not yet fully reflected.
- PEG Ratio: 2.85, but annual earnings growth of 13.7% could justify this premium over time.

Analysts project $166.33 price target (22% upside from current levels), while GuruFocus' GF Value of $166.62 suggests the stock is 3.5% undervalued. The key here is that the market has yet to factor in the full impact of the divestiture.

Market Dominance Through Vertical Integration

Keysight is now uniquely positioned to:
1. Capture $10B+ in combined addressable markets: The optical, photonic, and RTL power analysis segments it now leads total over $10 billion annually.
2. Reduce competition: The FTC's action eliminated direct rivals in these niches, creating a moat around Keysight's new offerings.
3. Leverage AI/ML synergies: Its AI-driven testing tools (e.g., 1.6T platform testing for data centers) can now be paired with the acquired design software, creating a “design-to-test” ecosystem no peer can match.

Risks, But the Upside Outweighs Them

• Valuation sensitivity: High P/E ratios could pressure shares if growth slows.
• Regulatory scrutiny: Though the FTC's oversight is temporary, compliance costs may arise.

However, Keysight's 23.69 EV/EBITDA ratio reflects strong cash flows ($1.35B FCF TTM), and its 23.5% projected ROE underscores profitability resilience.

Act Now—Before the Market Recognizes This Value

With a 6% annual revenue growth runway and a stock trading below its DCF fair value of $177.01, Keysight offers asymmetric upside. The acquisition isn't just a defensive move—it's a catalyst for becoming the go-to partner for next-gen semiconductor innovation, from 5G to autonomous vehicles.

The recent 7.4% YoY revenue jump in Q2 2025 (to $1.31B) underscores execution quality. As the world shifts toward AI-driven chips and photonic computing, Keysight's timing is perfect.

Final Call to Action

This is a buy now, reap later scenario. The divestiture's full impact on margins and market share will crystallize over the next 18–24 months. With analyst upgrades likely as growth materializes, investors who act now can secure a 22%+ upside—and potentially ride Keysight's rise to EDA dominance.

The question isn't whether Keysight is undervalued—it's whether you'll be on the right side of this trend.