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A decade ago, Nvidia was a major graphics card maker, vying for dominance with rivals like AMD and Intel. Today, the company is an AI giant with 70 to 95 percent market share in AI chips and the brains of OpenAI's ChatGPT. It's also the best-performing stock with the highest return of the past 25 years.
Why did Nvidia invest in AI chips over 10 years ago and get ahead of the competition? CEO Jensen Huang and board member Mark Stevens, Nvidia's two largest individual shareholders, spoke with Roelof Botha, partner at Sequoia Capital, to explain what Botha called “one of the most remarkable corporate turnarounds in history.”
Nvidia's original product was 3D graphics cards for PC gaming, but by the mid-2000s, company management realized that the PC market had reached a growth limit.
Related: Insiders say Nvidia CEO Jensen Huang turned down a merger offer in the company's early days. Here's why.
“We felt that unless we entered a brand new market where no one else was playing, we would always be confined to the PC gaming market and constantly at odds with Intel,” Stevens explained.
Jensen Huang, co-founder and CEO of Nvidia. Photo: Lionel Ng/Bloomberg via Getty Images
This need for a new market intersected with a product Nvidia already had in stock: its graphics processing unit (GPU), which could be used for tasks other than gaming. Researchers at universities around the world began studying the graphics cards and eventually built advanced computers with them.
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Huang recalled meeting with a quantum chemist in Taiwan who showed him a cabinet with a “huge array” of Nvidia GPUs on the shelves, with fans spinning to keep the system cool.
“He said, 'I built my own supercomputer.' And he told me that thanks to our work, he would be able to do his work in his lifetime,” Huang said.
Other researchers, such as New York-based Meta-AI chief Yann LeCun, began contacting Nvidia about the computing power of its chips. Nvidia began considering the AI market when AI had not yet entered the mainstream and was a “zero billion dollar market,” or a market that had not yet materialized.
“There was no guarantee that AI would ever really emerge, because you have to remember that there have been many interruptions and new beginnings in AI over the last 40 years,” Stevens said. “As a computer science concept, AI has been around for decades. But it never really established itself as a huge market opportunity.”
Related: Nvidia is 'slowly becoming the IBM of the AI era', says head of $2 billion AI startup
Huang and other business leaders still believed in AI and decided to invest billions in the technology in the 2010s.
“This was a huge turning point for our company,” Huang said. “The company's focus was diverted from its core business.”
Huang emphasized the additional costs, talent and capabilities Nvidia had to consider with the re-alignment as it affected the entire company. It took 10 to 15 years of effort, but this business decision led to Nvidia driving the AI revolution with an early ChatGPT partnership.
“The job of every CEO is to think outside the box,” Huang said. “You have to be the one who believes the company can achieve more than the company itself believes it can.”
Related: How to Become a Billionaire by 25, According to a College Dropout Who Became a $1.6 Billion-Net Worth CEO
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