In recent years, Nvidia has repeatedly translated its enormous increase in value into deals worth billions of dollars. Now it is the turn of chip design software developer Synopsys, which will receive $2 billion in a multi-year partnership. The goal is to use AI to design new AI chips faster via EDA (Electronic Design Automation).
Nvidia announced today that it has purchased Synopsys shares for $414.79 each, a discount of 0.8 percent on Friday’s closing price. Synopsys develops software that chip manufacturers use to create and test their designs, a field known as EDA. These tools are becoming increasingly important as chips become more complex and AI plays a greater role in the design process itself. Until now, validation and rehearsal have been outsourced to automation, but there is a chance that AI could come up with entirely new designs with much less human intervention.
As has often been the case recently, the stock market reaction was somewhat turbulent. Synopsys shares rose 7 percent in premarket trading, while Nvidia lost nearly 2 percent. Although this immediately represents a change in value worth billions for Nvidia, such an investment often pays off in the form of returning customers and a stronger ecosystem of chip players. In 2024, Nvidia already pumped $1 billion into smaller AI startups through 50 different deals, while Intel alone received $5 billion this year.
Circular deals
The deal did not come about out of the blue. Nvidia is itself a customer of Synopsys and uses its software to design its own chips. At the same time, Synopsys is now becoming a partner and an investment. This pattern of ‘circular deals’ raises questions, especially since Nvidia has also invested in companies such as OpenAI, xAI, and CoreWeave, which then spend billions on Nvidia hardware. Bloomberg caused quite a stir when it exposed this web of mutual spending.
In August 2024, the US Department of Justice opened antitrust investigations into possible abuse of power by Nvidia. The question is whether the company is forcing customers to purchase additional products in order to buy GPUs. However, the Synopsys deal is not exclusive. Synopsys continues to serve AMD as a customer, while Nvidia also collaborates with competitor Cadence Design.
AI tools for chip design
Under the partnership, Synopsys will use Nvidia’s development tools and code libraries for applications that include chip design, physical verification, and molecular simulations. These are all computationally intensive processes where AI acceleration can make a difference.
“The complexity and cost of developing next-generation intelligent systems require engineering solutions with deeper integration of electronics and physics, accelerated by AI capabilities and compute,” Synopsys CEO Sassine Ghazi said in a statement.
Nvidia has shown strong growth figures this year, even though there have been questions about its sustainability since the beginning of the AI boom. Revenue from the data center segment, which includes AI chips, continues to rise.