Ten years ago, NVIDIA was a leading graphics card manufacturer competing with competitors like AMD and Intel for dominance. Today, it's an AI giant with 70-95% of the AI chip market share, the brains behind OpenAI's ChatGPT, and the best-performing stock with the highest returns in the past 25 years.
Why did Nvidia invest in AI chips more than a decade ago, ahead of its competitors? Nvidia's two largest individual shareholders, CEO Jensen Huang and board member Mark Stevens, spoke with Sequoia Capital partner Rolof Botha to explain what Botha calls “one of the most remarkable business transformations in history.”
Nvidia's original products were 3D graphics cards for PC gaming, but by the mid-2000s the company's leaders realized the PC market had reached its growth limits.
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“We felt that unless we found a whole new market that no one else was in, we would be boxed in to the PC gaming market and would be constantly at odds with Intel,” Stevens explained.
NVIDIA co-founder and CEO Jensen Huang. Photo by Lionel Ng/Bloomberg via Getty Images
The needs of this new market overlapped with a product NVIDIA already had: graphics processor units (GPUs) that could be used for tasks other than gaming. Researchers at universities around the world began working on graphics cards, and eventually used them to build advanced computers.
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Huang recalled meeting a quantum chemist in Taiwan who showed him a closet with “huge rows” of Nvidia GPUs on shelves, with fans spinning to cool the systems.
“He told me, 'I've built my own supercomputer,' and that thanks to our work, he's been able to accomplish his work in his lifetime,” Huang said.
Other researchers, like Yann LeCun, chief of New York's Meta AI, began contacting Nvidia about the computing power of its chips. Nvidia began looking at the AI market when AI hadn't yet gone mainstream and was a “zero-billion dollar market,” meaning a market that hadn't yet materialized.
“There was no guarantee that AI would ever emerge, because it's been stopped and started so many times over the last 40 years,” Stevens said. “So AI has been around as a computer science concept for decades, but it's never really taken off as a big market opportunity.”
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Huang and other corporate leaders remain believers in AI, and decided to invest billions of dollars in the technology in the 2010s.
“This was a major turning point for our company,” Huang said. “Our focus shifted away from our core business.”
Huang highlighted the additional costs, talent and skills Nvidia had to consider as this shift affected the entire company. It took 10 to 15 years of effort, but this business decision led Nvidia to drive the AI revolution through its early partnership with ChatGPT.
“Every CEO's job is to see beyond,” Huang said. “You want to be the person who believes the company can achieve more than it believes it can.”
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