How Nvidia Became The 8th Largest Company In The World

We all know that ‘Nvidia’ is a large company. But no way they are the 8th largest in the world. Don’t they serve super niche demographics of gamers and professionals?

Well, you’re right as Nvidia comes in at rank 386 in terms of revenue, pulling in $21.89 billion annually.

But, Nvidia’s profit margins are actually so high and investors are so bullish on the future of the company, that despite only pulling in $21.89 billion in revenue, Nvidia is valued at upwards of a trillion dollars at $757 billion, making them the 8th largest company in the world.

So, here’s how Nvidia created a cash cow that lurks in the shadows.

Jensen Huang

Born in Taiwan, Jensen Huang spend his early childhood there but later immigrated to Kentucky. Later he majored in Electrical Engineering at Oregon State University.

He started his career as a director in a young startup called ‘LSI Logic.’ He jumped quickly from there and started his job as a microprocessor designer in ‘AMD.’

He was killing it at that time but wasn’t that happy. After completing his Master's in Electrical Engineering, he co-founded a startup with Curtis Priem and Chris Malachowsky.

NV

The trio had no clue, how to name the company or how exactly they were going to fund development. But they were sure from the very beginning, that they were going to produce GPUs or Graphics Processing Units.

They felt that video games created some of the world’s most computationally challenging problems, and if they could solve video games they could solve nearly any computing problem out there.

Aside from offering a great challenge, video games offered a massive opportunity. Gaming was just in its infancy and the original PlayStation hadn’t even come out yet. So, there was plenty of growth left.

But in 1994, there were plenty of companies in the semiconductor industry. But the worst part in this industry is that brand value doesn’t mean all that much.

On the bright side, this meant that Jensen and the duo could easily break into the market if created a superior product. But they only had $40000 in hand. Despite the difficulty and low budget, they worked through GPUs which they called ‘NV.’

NV simply stood for ‘Next Version,’ but it wasn’t until they incorporated the company that they came up with a name for the company itself. All of their prototypes were named NV.

Later they found a Latin word ‘Invidia’ which translates into ‘Envy.’ They dropped the ‘I’ from ‘Invidia’ and that’s how the company got its name.

Launching of The First Product

1995 according to a partnership with ‘SGS Thomson’ and ‘Diamond Multimedia Systems’ they launched NV1 as their first product. This launched as Diamond Edge3D.

It didn’t take long for video game companies to leverage the hardware.

SEGA became the first to port a 3D game called Virtual Fighter onto the new GPU. Over the next few years, Nvidia would form a couple of partnerships and launch a few bits of software and hardware.

The biggest release of Nvidia came in 1999. They launched the GeForce 256, which they like to call the world’s first GPU. They defined GPU as a single-chip processor that could process a minimum of 10 polygons per second.

Put that into perspective, modern GPUs are able to process 7 billion polygons per second. But this is where it all started.

Surviving The Purge

Before Nvidia could focus on reaching those insane numbers though, they needed to focus on survival, because the .com crash rolling around. But the .com crash didn’t initially impact Nvidia, as they were more of a background player as opposed to a consumer brand.

In fact, Nvidia has named the fastest-growing company in America in 2002. Ironically Nvidia would get crushed that very same year. Within just 12 months, Nvidia would crash 90%. To make things worse Curtis Priem would retire from the company the following year.

But Nvidia’s biggest development came during this time. That was no doubt, SLI. Scalable Link Interface allowed for multiple GPUs to work together and produce a singular output. Nowadays, SLI is mostly a joke. But it was a game-changer back in 2004.

Strategic Partnerships

In 2004, Nvidia formed a partnership with NASA where they helped NASA reconstruct the terrain of mars using their GPUs. That same year, they would team up with Blizzard Entertainment to create 3D graphics for World of Warcraft.

But the biggest of all of them came with Sony on PS3 in 2005.

With all of these developments and partnerships, Nvidia was able to survive the .com crash. So, by 2006, Nvidia was the only independent GPU company that was still standing.

It seemed like it was just blue skies ahead. Even Forbes named Nvidia as the company of the year in 2007. Suddenly, the 2008 financial crisis rolled around. They crashed nearly 85% this time. But eventually, they stood on their feet by 2010.

Modern Day Nvidia

Throughout the first half of the 2010s, Nvidia was more or less stagnant. They simply reached market saturation. They needed the market itself to grow larger before they could grow again.

Fortunately for Nvidia, the market would not only grow but would explode in 2016 and 2017 due to cryptocurrencies. As y’all probably know, Bitcoin made a mad dash to $20000 and took all the alternative coins with it to the moon in 2017.

Graphics cards happened to be perfect for cryptocurrency mining and especially Ethereum mining. Miners ate up the GPU market as they were willing to pay anything to get their hands on GPUs.

Miners didn’t care even they doubled, tripled, or quadrupled the price. Nvidia saw a supply shortage like never before and they were able to jack up prices through the roof.

Between 2016 and 2018, Nvidia’s quarterly profits jumped from $200 million to 1.2 billion per quarter. But this was just the beginning.

Shifting Markets

Given that Nvidia had reached market saturation with gamers, they shifted their focus to other markets which led him to Deep Learning and AI.

They formed a partnership with Tesla and provided them with the initial hardware for self-driving. They also launched a bunch of commercial cards like Titan and Quadro that appealed to institutional buyers.

After the launch of Ryzen CPUs, PCs became much more affordable and attracted a lot of console gamers. This affected Nvidia throughout 2018 and 2019, but then in 2020, the supply shortage hit. Now Nvidia on another rocketship.