A decade ago, Nvidia was a giant graphics card manufacturercompeting with competitors like AMD and Intel for dominance. It is now an AI giant with 70% to 95% of market share for AI chips, and brains OpenAI's ChatGPT. It is also the best performing stocks with the highest return in the last 25 years.
Why did Nvidia invest in AI chips over 10 years ago, ahead of the competition? CEO Jensen Huang and board member Mark Stevens, both of Nvidia the largest individual shareholderstalked to Partner Sequoia Capital Roelof Botha to explain what Botha called “one of the most remarkable business pivots in history”.
Nvidia's original product was 3D graphics cards for PC gaming, but company executives noticed by the mid-2000s that the PC market was reaching a growth limit.
“We thought we were always going to be in the PC gaming market and we were always going to be knocking heads with Intel unless we developed a whole new market that no one else was in,” Stevens explained.
Jensen Huang, co-founder and CEO of Nvidia. Photo: Lionel Ng/Bloomberg via Getty Images
That need for a new market intersected with a product Nvidia already had on hand: its graphics processing unit, or GPU, which can be used to power tasks outside of gaming. Researchers at universities around the world began exploring graphics cards, eventually building advanced computers with them.
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Huang recalled meeting a quantum chemist in Taiwan who showed him a cabinet with a “giant pile” of Nvidia GPUs on its shelves; house fans were spinning to keep the system cool.
“He said, 'I've built my own personal supercomputer.' And he told me that because of our work… he is able to do his job in his lifetime,” Huang said.
Other researchers, such as Chief of Meta AI Yann LeCun in New York, 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 yet to materialize.
“There was no guarantee that AI would ever show up, because, keep in mind, AI had had a lot of stops and starts over the last 40 years,” Stevens said. “I mean, AI has been around as a computer science concept for decades. But it had never really become a big market opportunity.”
Huang and other company executives still believed in AI and decided to invest billions in technology in the 2010s.
“This was a huge milestone for our company,” Huang said. “The company's focus had shifted away from its core business.”
Huang highlighted the additional cost, talent and skills Nvidia had to bring on with the pivot, as it affected the entire company. It took 10 to 15 years of effort, but this business decision saw Nvidia power the AI revolution with an early head start ChatGPT Partnership.
“Every CEO's job is supposed to look here,” Huang said. “You want to be the person who believes the company can achieve more than the company believes it can.”
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