NVIDIA invests $2 billion in EDA giant Synopsys, Jensen Huang praises "huge expansion opportunities" and denies a closed-loop transaction similar to OpenAI

NVIDIA has announced a significant partnership, this time different from the type of "AI closed loop" transactions that worry Wall Street, similar to its investment in OpenAI.

On December 1st, Monday before the market opened in the Eastern Time Zone, NVIDIA announced a strategic partnership with Synopsys, a leader in the electronic design automation (EDA) field, with NVIDIA investing $2 billion in Synopsys. The two parties will integrate NVIDIA's artificial intelligence (AI) computing technology deeply into the industrial design and engineering fields through years of collaboration, reshaping the entire design process from chips to systems.

Following the announcement of the partnership, Synopsys (SNPS) saw its stock price surge on Monday, initially rising over 6.9% in early trading, with the midday increase narrowing to below 5%, and closing up less than 4.9%. This marked the third consecutive trading day of gains, reaching the highest closing level since November 3rd and narrowing the cumulative decline for the year to below 10%. NVIDIA's stock price initially fell nearly 1.9%, but quickly turned positive and maintained its upward trend, reaching a daily high with an intraday increase of nearly 1.9%, closing up less than 1.7%.

The investment related to this partnership will make NVIDIA the seventh-largest shareholder of Synopsys, with a shareholding ratio of 2.6%. Amid recent concerns in the AI sector regarding internal cyclical transactions, NVIDIA CEO Jensen Huang clearly stated that the partnership with Synopsys is not an exclusive agreement and does not involve terms for purchasing NVIDIA chips. In other words, even with NVIDIA's investment, the nature of this partnership is different from NVIDIA's previous investment in OpenAI.

Jensen Huang emphasized that this collaboration will allow NVIDIA's technology to cover the trillion-dollar industrial sector, stating, "This is a huge opportunity for us to expand into the design and engineering fields," far exceeding the market space for consumer-side AI applications.

Details of the $2 Billion Investment: Discounted Placement and Strategic Significance

According to a statement released by both companies on Monday, NVIDIA purchased approximately 4.8 million shares of Synopsys at a price of $414.79 per share, representing a discount of about 0.8% compared to last Friday's closing price. These shares were issued through a private placement.

The transaction announcement indicated that Synopsys "will collaborate using NVIDIA's developer toolkits and code libraries in chip design, physical verification, and other EDA process applications."

Synopsys, headquartered in California, is one of the largest providers of chip design software and services globally. The company's tools assist in designing the complex layouts of billions of transistors and connectors in modern chips and verifying whether the hardware will function as expected before the production phase—this process is a critical step in building the chips required for AI systems, including those sold by NVIDIA.

Niraj Patel, an analyst at Bloomberg Industry Research, pointed out that Synopsys's technology is widely used by semiconductor and systems companies such as Alphabet and Tesla. This transaction will enable Synopsys to utilize more advanced chips in design and simulation tools across the automotive, aerospace, industrial, and energy sectors

Long-term Strategic Cooperation: From EDA to Digital Twins

This cooperation goes far beyond simple equity investment. According to NVIDIA's announcement, the long-term partnership between the two parties includes the following core elements:

"By utilizing NVIDIA's CUDA-X libraries and AI physics technology, Synopsys will further accelerate and optimize its extensive portfolio of compute-intensive applications, covering chip design, physical verification, molecular simulation, electromagnetic analysis, optical simulation, and more."

The two parties will also "integrate Synopsys' AgentEngineer technology with NVIDIA's agent AI technology stack—including NVIDIA's NIM microservices, NVIDIA's NeMo Agent Toolkit software, and NVIDIA's Nemotron model—to achieve autonomous design capabilities for EDA as well as simulation and analysis workflows."

In the field of digital twins, the two companies will collaborate "to achieve next-generation virtual design, testing, and verification for industries such as semiconductors, robotics, aerospace, automotive, energy, industrial, and healthcare by using highly accurate and complex digital twins." These solutions will leverage NVIDIA Omniverse, NVIDIA Cosmos, and other technologies.

The two parties also agreed to develop a joint marketing plan to promote GPU-accelerated engineering solutions, utilizing Synopsys' global network of thousands of direct sales personnel and channel partners.

It is noteworthy that the announcement clearly states:

"This partnership is not exclusive. NVIDIA and Synopsys continue to collaborate with the broader semiconductor and EDA ecosystem to create shared growth opportunities for the future of engineering and design."

Jensen Huang: From Data Centers to the Trillion-Dollar Industrial Market

In a media interview on Monday, Jensen Huang elaborated on the strategic significance of this deal for NVIDIA. He described it as a "revolutionary" industrial transformation rather than a simple business collaboration.

Jensen Huang stated, "This is a huge deal. The partnership we are announcing today is about fundamentally changing one of the most compute-intensive industries in the world—design and engineering. Synopsys is transforming companies, shifting software and all tools that have been used in the industry for about 35 years to GPU acceleration on NVIDIA."

Jensen Huang particularly emphasized the market size in the industrial sector. When asked why investors should focus on enterprise applications rather than consumer AI competition, he replied, "If you look at the trillion-dollar industries in the world, primarily industrial and business-to-business. These are now being transformed by platform shifts and serious industrial applications."

He illustrated the potential market space with specific data:

"Almost all industrial companies, manufacturing companies like NVIDIA, General Motors, Boeing, may spend hundreds of millions on engineering software tools, perhaps very low billions. However, their spending on prototyping all these products is easily 10 to 20 times that."

Jensen Huang pointed out that by completing prototype design in a virtual environment through digital twin technology, "market opportunities have grown by 10 to 100 times." Regarding the platform transition, Jensen Huang provided a key data point: "In 2016, 90% of the world's supercomputers were CPU-based, and 10% were GPU-based. This year, 90% are GPU-based, and 10% are CPU-based. The platform transition has occurred. Now, we are making this transition for the engineering design industry."

Sassine Ghazi, CEO of Synopsys, added: "You take a workload that might take two to three weeks to run and reduce it to a few hours. This is the value we deliver to customers by accelerating software on NVIDIA's GPUs through this partnership."

The Essential Difference from OpenAI Investments

From a commitment to invest up to $100 billion in OpenAI to a $5 billion stake in Intel, NVIDIA's recent investment activities have raised market concerns about cyclical trading and bubbles in the AI sector. However, Huang's remarks on Monday indicated that the aforementioned investments, viewed as closed-loop transactions in AI, are fundamentally different from the nature of NVIDIA's deal with Synopsys.

Huang told the media:

"This partnership is not exclusive, meaning that other chip manufacturer customers of Synopsys will be able to benefit from it. Moreover, this deal is unrelated to the agreement for purchasing NVIDIA chips."

He described this collaboration as "more like a technology upgrade." Huang stated that there are still too many old computers based on general-purpose chips in the automated design industry. "Establishing a closer relationship with Synopsys will accelerate the adoption of AI and accelerated computing in this field and can promote this technology to new markets more quickly."

On the same day, OpenAI announced it would hold equity in Thrive Holdings, an investment vehicle set up earlier this year by Thrive Capital, a major investor in OpenAI. This arrangement heightened market concerns that interconnected transactions could jeopardize the AI industry.

In contrast, while the deal between Synopsys and NVIDIA also deepens industry ties, it is not cyclical in nature.

D.A. Davidson analyst Gil Luria pointed out: "NVIDIA has significant control over who can win in the AI-driven computing market, and it wants to benefit from that influence. By collaborating more closely with Synopsys, it contributes power and credibility, which in turn will benefit from the appreciation of Synopsys' stock price."

Synopsys is a company with a client list that includes AMD, while NVIDIA also collaborates with Synopsys' competitor Cadence Design. This non-exclusive arrangement indicates that this collaboration is more about expanding the technology ecosystem rather than a closed commercial loop.

For NVIDIA, mastering the key position in the EDA chip design toolchain market means that its GPU-accelerated computing platform can penetrate the entire industry chain from chip design to industrial manufacturing, and this strategic value far exceeds a simple customer procurement relationship