Nvidia takes $2 billion stake in chip design software maker Synopsis, shares drop

Nvidia has invested $2 billion in chip design software maker Synopsys as part of an expanded multi-year alliance to jointly develop new tools to design products across industries using its artificial intelligence technology.

The deal, unveiled on Monday, will make Nvidia the seventh-largest shareholder in Synopsis, according to LSEG data, adding to its circular AI partnership in recent months that has fueled worries of a bubble in the industry.

The world’s most valuable company has made deals ranging from a $100 billion investment in ChatGPT parent OpenAI to a $5 billion stake in Intel.

Its stock fell more than 1% on Monday, while Synopsys rose 6%.

Gil Luria, an analyst at DA Davidson, said Nvidia has significant control over who wins in the AI-driven compute marketplace and wants to benefit from its impact.

“Partnering more closely with Synopsis contributes to that momentum and reliability, and in turn will benefit from Synopsis’ stock appreciation.”

Strengthening the position of the synopsis

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

The shares are being issued in a private placement to Nvidia, Synopsys disclosed in a regulatory filing.

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

The investment comes after Synopsis noted weakness in its intellectual property business in September, blaming export restrictions that disrupted business in China and challenges facing a major foundry customer – widely regarded as Intel.

Monday’s tie-up is not unique. Synopsys counts AMD as a customer, while Nvidia works with electronic design automation (EDA) firm rival Cadence Design.

Cadence shares fell more than 1%.