Nvidia Just Invested $2B in Synopsys—Any Value Here?

All this dealmaking, much of which is quite circular, in the AI scene of late has really taken the AI bubble fears of some to the next level. Regardless, Nvidia (NASDAQ:NVDA | NVDA Price Prediction) seems content on making smart deals across the scene, with one of the more recent notable deals involving a $2 billion bet on electronic design automation (EDA) firm Synopsys (NASDAQ:SNPS). Undoubtedly, the move stands out as intriguing, especially given that the EDA tool makers might be a sweet spot for AI monetization moving forward.

Arguably, the EDA firms, like Synopsys, are a prime example of applied AI and how the technology could certainly produce significant profits that more than justify those seemingly hefty front-loaded investments. Undoubtedly, I’m a big fan of Synopsys as well as its top peer, Cadence Design Systems (NASDAQ:CDNS), and think they serve as an example of how AI is helping enable firms to produce more powerful, efficient AI chips, which, in turn, can power AI models and tools that enable even better chips, and so on.

Sure, another Nvidia deal may come off as more AI bubble trouble, but I do think such a collaboration has a good chance to accelerate innovation while actually reducing the risk of sub-par ROIs.

Another circular deal to add to the mix. But investors should cheer this particular deal

While I think a healthy dose of skepticism is warranted on the part of investors, especially as AI bubble jitters look to worsen further from here, I just can’t help but feel constructive about Nvidia’s bet on Synopsys, which, apart from an investment, also involves a deepening of its partnership. At the end of the day, circular deal-making in AI might feed more AI bubble fears.

And while things could certainly end in tears, I do think that opportunistic investments and increased partnerships across the space are a great way to reduce wasted AI spend. Why reinvent the wheel when you can just invest and collaborate? So, while circular dealmaking may be dismissed as adding more fuel to the bubble, I’d argue that it might also be a decision that helps minimize excessive investment in “reinventing the wheel” in AI, so to speak.

For Nvidia, the question, I think, is “why recreate EDA tools and all the sort when one can build something so much better and more cost-effectively together?”

This is a smart deal that I think is good for the AI trade

Of course, it’s hard to eliminate wasted efforts and investments across the scene, but for the circular dealmaking skeptics, I’d argue that such deals are a good thing, not just simply fuelling a cycle that leads to more chip-buying and higher revenue growth for Nvidia and the like. Of course, it’s dangerous to make deals just for the sake of making deals, especially when valuations are arguably on the higher end.

However, regarding Synopsys, I do think it’s one of the more reasonably priced growth names in the AI space today. Arguably, it’s a timely applied AI firm that might be entering an age of colossal monetization.

The stock is in a rough spot, now down 25% from its peak, but I think there’s real money-making potential to be had here, especially as Nvidia and Synopsys join forces. I think the two firms are far more powerful when they work together than apart. And, at the end of the day, I think that’s why circular dealmaking in the AI scene might not be the biggest red flag that some bubble watchers might be bracing for.

The bottom line

Nvidia CEO Jensen Huang said that the deal “is going to expand the market of computing into the world of design and engineering for the very first time.” He’s absolutely right. And it’s time to take the man at his word as things get more collaborative across the AI scene in 2026. At 31.8 times forward price-to-earnings (P/E), Synopsys stock is starting to look cheap. Perhaps Nvidia walked away with a bargain, after all, if the AI boom has more gas in the tank.