Amazon.com Inc. (NASDAQ:AMZN) announced a multi-year deal worth more than $1 billion with Synopsys Inc. (NASDAQ:SNPS) Wednesday, expanding the chip-design technology behind AWS’s custom silicon push as it builds alternatives to processors from Nvidia Corp. (NASDAQ:NVDA).

Amazon will become the lead customer for Synopsys’ new application-optimized silicon IP business, essentially reusable chip designs tailored to specific workloads.

The agreement also expands Amazon’s use of Synopsys software to design, simulate and test increasingly complex chips.

Synopsys and Amazon will tailor the software for Amazon’s Trainium AI chips and Graviton processors.

Why It Matters

Amazon has increasingly pitched custom chips as a way to improve the economics of AI computing.

“From Graviton to Trainium, purpose-built chips deliver better performance at lower cost because they’re designed for exactly what customers need,” Amazon custom-silicon chief Peter DeSantis said.

CEO Andy Jassy said earlier this year that virtually all AI had historically run on Nvidia chips but that “a new shift has started.”

Amazon estimates Trainium could eventually save it tens of billions of dollars in annual capital spending and give AWS several hundred basis points of operating-margin advantage compared with relying on other companies’ chips for AI inference. Jassy also said AWS intends to remain a major Nvidia partner.

Amazon’s custom-chip business has already surpassed a $25 billion annual revenue run rate and is growing at a triple-digit percentage year over year. Anthropic and OpenAI have made multi-year, multi-gigawatt commitments to Trainium.

What’s in It for Synopsys

The agreement moves Synopsys’ new business toward a license-plus-royalty model, giving it the potential to earn more as production volumes rise.

For scale, Synopsys’ Design IP business generated $1.75 billion in revenue in its most recent fiscal year, Reuters reported. Amazon’s new agreement is worth more than $1 billion, spread over multiple years.

What Prediction Markets Say

Prediction market traders still see Nvidia comfortably holding the top spot.

Nvidia has an 80% chance of ending 2026 as the world’s largest company by market capitalization on Polymarket, versus 15% for Apple and 6% for Alphabet, another major developer of custom AI chips. Amazon trades below 1%. The market has attracted about $7.6 million in volume.

ARK Invest earlier this year called Amazon a “sleeping giant” in custom silicon, highlighting the growing competition facing Nvidia.

Synopsys shares were up more than 3% Wednesday afternoon, while Amazon gained about 1.5%.

Image: Shutterstock

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