Amidst the spate of big artificial intelligence deals this year with billions of dollars worth of change, Nvidia’s announcement Monday of a $2 billion investment to expand its long-standing partnership with Synopsys may seem like just another increment. Nvidia CEO Jensen Huang asserted that this is not the case in an interview with Jim Cramer shortly after the news broke. “This is a big deal,” Jensen said. Here’s why: Synopsys provides software and tools that enable companies like Nvidia to design, test, and validate semiconductors. “NVIDIA was built on a foundation of things like Synopsys design tools,” Jensen said. The deal will allow Synopsys, which completed its acquisition of engineering simulation software maker Ansys earlier this year, to leverage Nvidia’s AI platform to provide computer model design and engineering solutions to many industries. Nvidia’s powerful chips, called graphics processing units (GPUs), are the gold standard for AI. With Monday’s deal, Nvidia will bring GPU-accelerated computing to a global industrial sector that represents a multi-trillion dollar addressable market. What makes that possible is that the AI we’re talking about here follows the laws of physics. That means it can be trusted to show how things actually work in the real world. Synopsys CEO Sashin Ghazi, alongside Jensen, said that in a practical sense, what we’re talking about here is compressing a workload that might have taken two or three weeks into a few hours. Despite the efforts of Synopsys and other electronic design automation (EDA) providers, NVIDIA still spends “billions of dollars” “prototyping” products in the physical world, Jensen said. “In the future, we’re going to prototype all of these products digitally so that we don’t waste money when building them physically,” he explained. “Essentially, you can do the entire engineering work within the digital twin’s computer before you even build the digital twin. So the types of products you can invent, the quality you can achieve, and the speed you can achieve are going to be extraordinary.” Jensen said industrial companies that make things, whether it’s Nvidia, GM or Boeing, spend hundreds of millions, even billions, of dollars on engineering software tools. However, he noted that the amount spent on prototyping could be 10 to 20 times that amount. The ability to digitally prototype is therefore a huge opportunity for industrial companies to reduce costs. Mr. Jensen told Jim: “This is the culmination of everything I showed you when you visited Nvidia a few years ago. It took Synopsys and the rest of the EDA (electronic design automation) industry this long to create the software stack needed to accelerate software that has traditionally only run on CPUs (central processing units),” he said, adding that “suddenly the market opportunity increases 10 to 100 times.” Jim Cramer, who started recommending Nvidia stock in 2009, first interviewed Jensen a year later. The “Mad Money” host even changed the name of his dog to “NVIDIA” in 2017 to show his faith in the company. Jim’s Charitable Trust was first purchased in August 2017 and exited in October 2018, but NVIDIA stock has been there ever since it reinstated it in March 2019. More recently, Jim hosted Jensen at the Investment Club’s October meeting, where the CEO was able to meet many of the early Nvidia investors who made significant profits in the stock. Trusts are portfolios used by clubs. In Monday’s interview, Jim also pressed Jensen on recent concerns that the launch of Gemini 3, which features Google’s custom chips, will infringe on Nvidia’s GPU business. Google’s proprietary semiconductor, called the tensor processing unit, was co-designed with Broadcom. Jensen praised Google’s chips, but dismissed concerns by saying, “What Nvidia is doing is much more versatile,” and returned to the possibility of investing in Synopsys. “You’re now seeing real, tangible examples of opportunities that can be enabled with our platform that no one else can.” AI has gone far beyond our hottest chatbots and consumer solutions, and has helped weigh on Nvidia’s stock price since the launch of Gemini 3. Jensen said Monday’s announcement is about a revolution in the industrial software industry, and the stakes are much higher. On the consumer side, being 90% correct in answering a query or recommending an item, movie, or new music with 90% accuracy is a pretty good start. But on the industrial side, “the 10% you don’t get right becomes mission critical,” the CEO added. That’s why the pace of advancement in consumer AI is so fast. But while consumer developments are exciting, the real opportunity is probably on the industrial side. So far, capital spending by the world’s largest technology companies to support consumer AI has been the real driver of AI investment and infrastructure spending, but the industry is now at a point where spending should increase elsewhere, including automakers like Ford and GM, and even South Korean shipbuilders. This not only signals increased spending in the coming years, but also a diversification of the spending base, which should substantially help reduce customer base risk for companies like Nvidia, which has seen much of its demand come from a select few customers in recent years. Ultimately, this move marks a significant milestone for Nvidia and lays the groundwork for a significant expansion of industrial AI, making AI transactions more widespread. As we see it, this deal is a strong move for both companies. It will enable Synopsys to better serve its customers, while helping Nvidia expand its own ecosystem and further lay the foundation for GPU-based accelerated computing infrastructure. “Of all the AI opportunities, industrial AI, physical AI, is the biggest. And it’s very clear why. Today’s global industry is a large part of a $100 trillion industry,” Jensen said on a conference call hosted by the companies to discuss the deal. That industry, whether it’s car or train design or airplane design or computer design, is primarily based on general-purpose computing…but as we move forward, we do more. We’ve been preparing our itinerary for several years, long before we created a physical representation, to expand the reach of nearing and make it possible to do almost anything in the world within a digital environment, and today’s announcement kicks it into gear. Jensen concluded by saying that since Synopsys was founded, the company has allowed Nvidia to design its own chips, and that the deal announced Monday will “enable anyone to design anything that will physically appear in the future.” (Jim Cramer’s charitable trusts are long NVDA, AVGO, BA. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. 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