Nvidia takes $2 billion stake in chip design software maker Synopsys, shares fall

Nvidia has invested $2 billion in chip design software maker Synopsys as part of an extensive multi-year partnership to jointly develop new tools for designing products across industries using its artificial intelligence technology. The deal, unveiled Monday, would make Nvidia the seventh-largest shareholder in Synopsys, according to LSEG data, adding to the string of circular AI partnerships in recent months that have sparked concerns of an industry bubble.

The world’s most valuable company has made deals ranging from a whopping $100 billion investment in ChatGPT parent company OpenAI to a $5 billion stake in Intel.The stock fell more than 1% on Monday, while Synopsys rose 6%.

“Nvidia has substantial control over who wins in the AI-powered computing market and would like to capitalize on that impact,” said DA Davidson analyst Gil Luria.

“By working more closely with Synopsis, it will add momentum and credibility, and in turn will benefit from the appreciation of Synopsys stock.”

STRENGTHENING THE POSITION OF SYNOPSYS

Nvidia, a Synopsys customer, bought about 4.8 million shares of the company for $414.79 each, representing a discount of about 0.8% to the stock’s closing price on Friday.

The shares will be issued to Nvidia through a private placement, Synopsys announced in a regulatory filing.

Synopsys will use Nvidia’s suite of developer tools and code libraries to work on its applications, including chip design, physical verification and other electronic design automation (EDA) processes.

The investment comes after Synopsys noted weakness in its intellectual property business in September, with export restrictions disrupting trade in China and problems at a major foundry customer – widely considered to be Intel.

Monday’s match is not exclusive. Synopsys counts AMD as a customer, while Nvidia is working with electronic design automation company (EDA) competitor Cadence Design.

Cadence shares fell more than 1%.