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

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

The deal, unveiled on Monday, would make Nvidia the seventh largest shareholder in Synopsys, according to LSEG data, adding to its slew of circular AI partnerships in recent months that have sparked worries of a bubble in the industry.

The world's most valuable firm has struck deals ranging from as much as a $100 billion investment in ChatGPT parent OpenAI to a $5 billion stake in Intel.


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

"Nvidia has substantial control of who wins in the AI-driven compute marketplace and it would like to benefit from that impact," D.A. Davidson analyst Gil Luria said.

"By partnering more closely with Synopsis it contributes momentum and credibility, and in turn will benefit from the appreciation of Synopsys shares."

STRENGTHENING SYNOPSYS' POSITION

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

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

Synopsys will use Nvidia's suite of developer tools and code libraries to work on its applications spanning 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, blaming export restrictions that disrupted business in China and challenges at a major foundry customer - widely considered to be Intel.

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

Cadence shares fell more than 1%.