Semiconductor giant Nvidia became the world’s most valuable company this week thanks to smart moves it made years ago that allowed it to corner the market for artificial intelligence chips.
Long before Nvidia became a leader in the corporate world, it was a young startup first conceived at a Denny’s booth by CEO Jensen Huang along with co-founders Chris Malachowski and Curtis Priem. Shortly after its founding in 1993, the company invented one of the first graphics processing units, or graphics processing units, originally intended for use in video games and graphic design.
Since then, the company has raised its ambitions and earned its name (a play on the Latin word for envy) by humiliating tech giants such as Apple, Microsoft and Google, with a market capitalization of $3.34 trillion that has since grown by more than doubled. January. But how did it get here? The key to success, analysts say Luckstarting several decades ago with early preparation for the artificial intelligence frenzy now sweeping the markets.
Processors, the most common computer chips dating back to the 1950s, are great for performing complex calculations one at a time, but they didn’t quite meet the needs of data scientists as research into deep learning and artificial intelligence intensified in the 2010s. Nvidia GPUs, on the other hand, were ideal for artificial intelligence because they could perform many simple calculations simultaneously. In 2012, Ilya Sutskever, former chief scientist at OpenAI and co-founder of AI startup Safe Superintelligence, was already using Nvidia chips for an early convolutional neural network called AlexNet.
Nvidia’s chips have evolved rapidly in recent years, and its GH200 Grace Hopper superchip, released last August, can now perform 200 quintillion (200 followed by 18 zeros) calculations per second.
But Nvidia was able to capture the artificial intelligence market only because of timely bets made by CEO Jensen Huang several years earlier, said Tristan Guerra, a senior analyst at Baird Semiconductors. Luck. One forward-thinking move was the creation of CUDA, a high-level programming tool that the company created in 2007 to help unlock the full capabilities of its GPUs in a simple way.
“Jensen, Nvidia’s co-founder and CEO, is a visionary who saw early on the GPU adoption trends in the data center and aligned the company’s strategy with that vision,” Guerra said.
CUDA is now so widely used that it’s hard for companies building large language models like OpenAI’s ChatGPT to imagine using other technologies, added John Abbott, infrastructure analyst at 451 Research, which is part of S&P Global Market Intelligence.
“Training large models can take months, and massive clusters are needed to reduce this time. Since mature software tools and the skills required to use them are readily available for Nvidia GPUs, there was virtually no other choice. Nvidia GPUs have become the de facto standard,” Abbott said in an email.
In addition to the first-mover advantage, Guerra said the company also has a technological advantage.
“Nvidia provides a complete supercomputing solution, including high-performance hardware (chips) and software package. Competitors only offer artificial intelligence chips,” Guerra said.
Still, Nvidia faces a number of threats to its dominance in artificial intelligence chips, Abbott warned. Although Nvidia controls about 90% In the AI chip market, some major tech competitors such as Meta and Google have started producing their own chips to compete.
The company also faces geopolitical headwinds in China. USA limiting Nvidia’s ability to expand in the country, and the Chinese government is trying hard to create an alternative to the company’s products. The threat of war can also destroy a company’s business.
“Taiwan, where NVIDIA currently sources all of its GPUs from, is under political threat. Continued supply chain issues also pose a major risk,” Abbott said.
However, for now, Nvidia is still at a high level. The company’s stock has soared so much that the company conducted a 10-for-1 stock split earlier this month. Its gains represented a third of the S&P 500’s total value added since January.