Ten years ago, Nvidia was the largest maker of graphics cards, challenging rivals such as AMD and Intel for dominance. It is now an AI giant with 70% to 95% market share of AI chips, and the brains of OpenAI’s ChatGPT. It is also the best performing stock with the highest return over the last 25 years.
Why did Nvidia invest in AI chips 10 years ago, ahead of the competition? CEO Jensen Huang and board member Mark Stevens, Nvidia’s two largest shareholders, spoke with Sequoia Capital partner Roelof Botha to explain what Botha called “one of the most important deals in history.”
Nvidia’s first product was 3D graphics cards for PC games, but company leaders realized in the mid-2000s that the PC market was reaching its growth limit.
Related: Nvidia CEO Jensen Huang Turned Down a Merger Offer in the Company’s Early Days, According to Insiders. Here’s Why.
“We felt that we would always be included in the PC gaming market and we always butted heads with Intel if we didn’t create a new market that no one else was in,” explained Stevens.
Jensen Huang, co-founder and CEO of Nvidia. Photographer: Lionel Ng/Bloomberg via Getty Images
That new market demand conflicts with a product Nvidia already has: its graphics processor unit, or GPU, which can be used to power tasks outside of games. Researchers at universities around the world began experimenting with graphics cards, eventually building advanced computers with them.
Related: Is It Too Late to Buy Nvidia? Former Morgan Stanley Strategist Says ‘Buy High, Sell High.’
Huang recalled meeting a quantum chemist in Taiwan who showed him a cabinet with a “giant array” of Nvidia’s GPUs on its shelves; house fans were around to keep the show cool.
“He said, ‘I built my own supercomputer.’ And he said to me because of our work… he is able to do his work while he is alive,” Huang said.
Some researchers, like Meta AI CEO Yann LeCun in New York, began reaching out to Nvidia about the computing power of its chips. Nvidia first considered the AI market when AI was not yet mainstream and was a “zero billion dollar market” or a market that had not yet arrived.
“There was no guarantee that AI would ever really emerge because, remember, AI has had a lot of stops and starts over the last 40 years,” Stevens said. “I mean, AI has been around as a concept in computer science for decades. But it never really took off as a big market opportunity.”
Related: Nvidia is ‘Slowly Becoming the IBM of the AI Era,’ According to the Leader of the $2 Billion AI Startup.
Huang and other company leaders still believe in AI and decided to invest billions in the technology in the 2010s.
“This was a big pivot for our company,” Huang said. “The company was very focused on its core business.”
Huang highlighted the additional costs, talent, and skills Nvidia had to account for with the pivot, as it affected the entire company. It took 10 to 15 years of effort, but that business decision led to Nvidia enabling the AI revolution with the first ChatGPT partnership.
“Every CEO’s job is to look around the corner,” Huang said. “You want to be someone who believes the company can achieve more than the company believes it can.”
Related: How to Become a Billionaire in 25 Years, According to a College Dropout Turned CEO Worth $1.6 Billion
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