Here's Why Shares in This Nvidia Partner Soared This Week

Shares in Synopsys (NASDAQ: SNPS) rose by 11.7% last week. There's little doubt as to the reason why: the announcement of an expanded strategic partnership with Nvidia, which involved Nvidia investing $2 billion in Synopsys stock.

Synopsys goes for growth.

The deal makes perfect sense for Synopsys' long-term growth aspirations, which center on its silicon-to-systems approach. The "silicon" part originates from its electronic design automation (EDA) solutions, which help designers research and develop chips. The "systems" part derives from the engineering simulation software business acquired through the acquisition of Ansys earlier in the year.

The idea is that customers can design chips using Synopsys EDA and then test the results of the systems and products they create using engineering simulation software. Given that chip design is moving far beyond just semiconductor companies, many of which will be Ansys customers, there's a major opportunity for Synopsys to expand its total addressable market (TAM) with the acquisition of Ansys.

Where Nvidia fits in

There's also a significant opportunity arising from the Nvidia partnership, whereby Synopsys' intended expansion across multiple industries aligns with Nvidia's desire to reach new customers. At the same time, Synopsys' offerings to those customers will be enhanced by embedding Nvidia's AI and accelerated computing technology in Synopsys EDA.

Image source: Getty Images.

It's an exciting new development, and readers might also note that Nvidia's investment in Synopsys' longtime partner, Intel, may well stabilize its foundry business (a major customer), leading to more orders for Synopsys. Whichever way you look at it, Synopsys looks well set to grow in the future.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel, Nvidia, and Synopsys. The Motley Fool has a disclosure policy.