Nvidia, the kind of company that makes others invidious…

Summary

Nvidia, founded in 1993, has evolved from a startup on the brink of bankruptcy to a tech giant on the verge of a trillion-dollar market capitalization, driven by its pioneering role in GPGPU technology and the recent surge in demand for AI and machine learning applications.

Abstract

Nvidia Corporation, established in April 1993 by Jensen Huang and others, has navigated through significant challenges and transformations to become a leader in the technology industry. Initially facing potential failure after its first major contract with Sega, Nvidia was saved by an ethical decision from Sega's president to honor their agreement. The company's introduction of CUDA in 2007, which enabled GPUs for general-purpose processing, was initially met with skepticism but later proved to be a visionary move. Despite achieving leadership in mobile chips by 2010, Nvidia strategically withdrew from that market to focus on its core mission of building advanced computer components. This decision, along with the subsequent boom in generative algorithms and machine learning, has positioned Nvidia as a dominant force in the industry. The company's H100 chip has significantly contributed to its status as a key player in machine learning infrastructure, leading to a substantial increase in market capitalization and placing it on the cusp of joining the exclusive trillion-dollar market cap club.

Opinions

The decision by Sega's president to fully pay Nvidia was seen as ethically appropriate and crucial for Nvidia's survival.
Analysts initially doubted the success of Nvidia's GPGPU strategy, considering it a misguided approach.
Nvidia's perseverance with the development of CUDA, despite years of poor results, is now recognized as a critical factor in its current success.
The company's withdrawal from the mobile chip market in favor of focusing on advanced computer components is viewed as a bold and mission-driven move.
The recent explosive growth of generative algorithms and machine learning, exemplified by ChatGPT, has greatly benefited Nvidia and validated its strategic focus.
Nvidia's significant one-day increase in market capitalization, surpassing the combined valuation of several major companies, underscores its influential position in the tech industry.
The anticipation is high that Nvidia will continue to experience revenue growth and become the first semiconductor company to reach a $1 trillion valuation, reflecting its timely alignment with the demands of the AI revolution.

Nvidia, the kind of company that makes others invidious…

Nvidia Corporation was founded 30 Years ago, in April 1993, in Sunnyvale, California, and went public in 1999. One of its founders, Jen-Hsun “Jensen” Huang, a Taiwanese immigrant who came to the United States at the age of nine, is the company’s CEO and president, and owns 3.6% of its stock.

The company has gone through many ups and downs. Its first major contract for the development of a 3D chip was with Japan’s Sega. After a year, Huang realized that his architecture wouldn’t work, and recommended that Sega look for another partner, but asked its president to pay the full amount of the stipulated contract, because if he did not, given the magnitude of the investment made, his company would go bankrupt: Sega’s president considered it ethically appropriate, and the company was able to save itself.

In 2007, the company launched CUDA, a parallel computing platform and application programming interface (API) that enabled software to use graphics processing units (GPUs) for general-purpose processing. That approach, general-purpose computing on graphics processing units (GPGPU), was considered a misguided strategy by most analysts, who thought that development and adoption of a new platform would be extremely difficult take too many years to reach significant adoption. The company, which decided to persevere with its development and vision, went through several years of poor results. But after those years, uses such as accelerated graphics rendering, advanced cryptographic algorithms, and cryptocurrency mining came along and boosted the use of the company’s products.

By 2010, the company had achieved leadership in mobile chips, but surprisingly, it decided to withdraw from a fast-growing market, and instead dedicate itself to what it saw as its mission: to build components for computers capable of doing what ordinary computers could not do. That vision, and the enormous sacrifice in every way that decision entailed, has made the company what it is today.

And what is the company today? Quite simply, one on the verge of entering the select trillion-dollar market capitalization club, having benefited from the explosive growth of generative algorithms and machine learning in the wake of ChatGPT. One of its GPUs, the H100 chip, has made the company one of the most valuable in the world, the real beast of the machine learning industry infrastructure. The company has risen more than $219 billion in market capitalization overnight, one of the most significant one-day increases in market capitalization for any company in the market. In just one day, Nvidia has grown more than the current valuation of Uber, PayPal, Spotify, Coinbase and Robinhood combined. The company generated gross revenue of $7.2 billion, about 10% higher than expected, a new revenue record and a 64% year-over-year increase.

Growing demand for the chips Nvidia makes for generative algorithm and machine learning applications, coupled with the company’s forward-looking vision, likely mean that its revenues will continue to grow, and it’s only a matter of time before it becomes the first semiconductor company to reach a $1 trillion valuation: what happens when a company is in the right place at the right time. And an inspiring story. Academics, prepare it for your class discussion.

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