Jim Cramer explains why NVIDIA’s Synopsys deal boosted stock prices

CNBC’s Jim Cramer breaks down Monday’s market trends and examines why the artificial intelligence giant is doing what it does. Nvidia It made a profit after announcing a partnership with electronic design automation company Synopsys.

“NVIDIA and Synopsys’ efforts have the potential to deliver significant real benefits, although they are largely invisible to consumers,” he said. “Wall Street loves business-to-business deals.”

Nvidia announced Monday that it has acquired a $2 billion stake in Synopsys, expanding the two companies’ long-standing partnership. Nvidia CEO Jensen Huang told CNBC’s “Squawk on the Street” that the deal is aimed at “revolutionizing design and engineering in one of the world’s most compute-intensive industries.”

Nvidia stock rose 1.65% and Synopsys closed up 4.85%. Nvidia stock has been under pressure lately as investors worry about the company’s China operations and competition from fellow hyperscalers. googleis expanding production of its own chips.

Kramer said the partnership with Synopsys is important because it will make large-scale construction much easier and cheaper, potentially leading to “replacement cycles of enormous scale.”

Nvidia’s investment in Synopsys expands the company’s reach into profitable endeavors beyond artificial intelligence chatbots, Cramer noted. He suggested that since OpenAI is an affiliate of Nvidia, it would not be ideal for Nvidia to see Alphabet’s new version of Gemini gaining popularity while OpenAI’s ChatGPT slumps. But he said chatbots are a “business-to-consumer strategy,” and the stock market is finding that the dynamics are more volatile and harder to strategize than in business-to-business operations.

But he acknowledged that it’s difficult to tell whether the Synopsys deal will “stop the selloff” in Nvidia stock.

“Nonetheless, this agreement is important,” he said. “It wasn’t for show, it was for substance.”

Nvidia declined to comment beyond Monday’s press release and Huang’s “Squawk on the Street” interview.

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Disclaimer CNBC Investing Club owns shares of Nvidia.