Synopsys Just the Latest to Strike a Deal With Nvidia. What It Means for the Stock.

Synopsys stock jumped on Monday after the software company landed a deal with Nvidia. (Dreamstime)

Key Points

• Nvidia invests $2 billion in Synopsys common stock at $414.79 a share.
• Synopsys shares rise sharply following the investment.
• The investment expands an existing partnership between chip maker Nvidia and Synopsys.

Nvidia said Monday that it had taken a $2 billion stake in Synopsys , part of an expanded partnership that could see artificial intelligence play a bigger role in industrial design and engineering.

Synopsys stock rose 4.9% to $438.29 on Monday, while shares of Nvidia, the leading maker of chips for artificial intelligence, rose 1.7% to $179.92.

Nvidia said it had invested $2 billion in Synopsys common stock at a purchase price of $414.79 a share. Synopsys is the largest provider of electronic design automation software, which is used to design semiconductors.

Created with Highcharts 9.0.1SynopsysStock ticker: SNPSSource: FactSetAs of Dec. 1, 4 p.m. ET

Created with Highcharts 9.0.1Nov. 25Dec.390400410420430440$450

“The complexity and cost of developing next-generation intelligent systems demands engineering solutions with a deeper integration of electronics and physics, accelerated by AI capabilities and compute,” said Sassine Ghazi, president and CEO of Synopsys, in a statement. “No two companies are better positioned to deliver AI-powered, holistic system design solutions than Synopsys and NVIDIA.”

The crucial role of Synopsys in the chip industry could lead to fears that Nvidia is seeking to deprive its rivals of its services. However, the two companies emphasized that their partnership isn’t exclusive and that both companies will continue to work with the broader industry.

While much of the focus regarding AI until now has been on consumer applications such as ChatGPT and the effect on the software industry, the Nvidia-Synopsys partnership could lead to bigger effects in the engineering and industrial worlds.

The companies said they will collaborate to enable virtual design, testing and validation through the use of “digital twins”—simulations of physical processes—for industries such as semiconductor, robotics, aerospace, automotive, energy, and healthcare.

“This is going to expand the market of computing into the world of design and engineering for the very first time,” Nvidia CEO Jensen Huang said in an interview with CNBC.

Write to George Glover at george.glover@dowjones.com and Adam Clark at adam.clark@barrons.com