NVIDIA Corporation
- Date:
- 1993 - present
- Ticker:
- NVDA
- Share price:
- $853.54 (mkt close, Apr. 09, 2024)
- Market cap:
- $2.18 tr.
- Annual revenue:
- $60.92 bil.
- Earnings per share (prev. year):
- $12.06
- Sector:
- Manufacturing
- Industry:
- Semi General
- CEO:
- Jen-Hsun Huang
- Headquarters:
- Santa Clara
NVIDIA Corporation (NVDA) is an American semiconductor company and a leading global manufacturer of high-end graphics processing units (GPUs). Based in Santa Clara, California, NVIDIA holds approximately 80% of the global market share in GPU semiconductor chips as of 2023.
Unlike general-purpose central processing unit (CPU) semiconductor chips, GPUs are built to speed up graphics-intensive applications such as video games, editing, and 3D rendering as well as artificial intelligence (AI) and machine learning (ML) applications. NVIDIA has been at the forefront of GPU technology for over 25 years and is one of its early pioneers.
Having established itself as one of the world’s leading chip producers specializing in GPU technology, NVIDIA also positioned itself as one of the main suppliers of both AI hardware and software. Its breakout moment in the industry took place in 2022, when OpenAI’s ChatGPT generative AI chatbot became available to the general public. OpenAI developed its technology using a supercomputer powered by 10,000 NVIDIA GPUs.
Operational characteristics and key products
NVIDIA’s focus on GPU technology, in contrast to the prevailing CPU technology, was a key factor in establishing both its market differentiation and competitive advantages.
Whether by design or inherent capacity and improvement, GPU technology excels at parallel processing—utilizing more cores in order to allow multiple processes to run simultaneously. In comparison, CPUs utilize serial processing, which generally requires the completion of one process before the next one can begin.
By concentrating its research and production on GPUs, NVIDIA significantly advanced chip capacity within the semiconductor industry.
NVIDIA was also able to accelerate its own chip manufacturing process to produce a new chip every six months, as opposed to the historical industry average of 18 months. This process advantage gave NVIDIA an edge in its production cycle as well as its capacity to quickly improve and implement new technologies through significant R&D investments. Key products include:
- GeForce GTX and RTX series. Used primarily in gaming and professional workstation applications.
- NVIDIA A and H series and DGX systems. Supports artificial intelligence (AI) and data center applications.
- NVIDIA Tegra series. Designed for small devices such as car components, smartphones, and handheld electronics.
- NVIDIA Mellanox ConnectX SmartNICs and Quantum InfiniBand. GPUs utilized in cloud applications, data storage, and machine learning.
- CUDA, AI Enterprise, and DRIVE. GPUs tailored for software developers (DRIVE being specifically designed for developers of self-driving car software).
The 1990s: Founding years to IPO
NVIDIA Corporation was founded in April 1993 by three American computer scientists: Jen-Hsun (“Jensen”) Huang, previously a director at LSI Logic and microprocessor designer at AMD; Chris Malachowsky, an engineer at Sun Microsystems; and Curtis Priem, a senior staff engineer and graphic chip designer at IBM and Sun Microsystems.
The name NVIDIA is an amalgamation of two terms: “invidia,” the Latin word for envy, and the acronym NV (short for “next vision”), which the company used early on to label its files. In the year of its founding, the company received an initial investment of $20 million in venture capital funding from firms such as Sequoia Capital, giving it the early financial support and market credibility that would lead to its initial public offering (IPO) six years later, in 1999.
The company’s initial focus was on graphics-based computing and video games. This would become a major differentiating factor and, in time, a competitive advantage for NVIDIA. The company would become a pioneer of GPU technology, capitalizing on its multi-core and parallel processing speed—both lacking in standard CPU processes.
In 1997, NVIDIA gained a foothold in the computer gaming industry with the launch of the RIVA series of graphics processors. The following year, 1998, the company released the RIVA TNT, a PC graphics accelerator chip that helped expand NVIDIA’s reputation.
In 1999, the year the company went public, NVIDIA released the GeForce 256. This product introduced onboard transformation and lighting (T&L) to consumer-grade hardware. The success of these products won NVIDIA the contract to develop the hardware for the Xbox, Microsoft’s gaming console. NVIDIA received a $200 million advance for the project.
The 2000s: Gaming, real-world applications, and controversy
Over the next decade, NVIDIA would solidify its position as a formidable gaming console chip supplier. In the middle of the decade, Sony would select NVIDIA to assist in the design of the RSX Reality Synthesizer proprietary graphics processor for the Sony PlayStation 3.
However, the early 2000s also saw NVIDIA’s shift beyond the gaming industry, a move that the company would expand on throughout most of the decade. In 2003, NVIDIA worked with NASA to develop a photorealistic Mars simulation. NVIDIA also became a major graphics chip supplier for a number of Audi’s vehicles.
The company’s growth was publicly recognized when, in 2007, NVIDIA was named the Forbes “Company of the Year.” Soon after this crowning accolade, however, the company would face a series of setbacks that would mire the chipmaker in legal hurdles and lost business opportunities.
At the center were reports that certain mobile chips and GPUs had “abnormal failure rates” as a result of manufacturing defects. Despite the red flags, the company would not reveal which products were affected. As a consequence, NVIDIA found itself on the receiving end of a class-action lawsuit, which was settled in September 2010.
In January 2011, NVIDIA signed a $1.5 billion cross-licensing deal with IBM, which ended all pending litigation between the two firms.
The 2010s: Parallel computing and AI technology
Luckily, or perhaps with keen forward-leaning insight, the company’s development in parallel computing technology would not only help the chip manufacturer recover from its end-of-decade slump, but would also help launch the company’s leading position in a then-remote field: artificial intelligence (AI).
Parallel computing is a computational paradigm that consists of breaking down a single problem into several sub-parts and then solving them simultaneously using multiple processors. Ultimately, it allows for faster execution. And it’s exactly the kind of computational speed and power that’s needed to develop and run sophisticated AI applications.
NVIDIA’s seminal step toward later AI and deep learning technology began back in 2006, when it released its Compute Unified Device Architecture (CUDA) platform, a major innovation in GPU-based parallel computing technology.
While the company continued to develop—and eventually monetize—AI technology, it added other revenue drivers to its core gaming enterprise.
- Growth through acquisition. Strategic acquisition has been part of NVIDIA’s growth since its purchase in 2000 of graphics card maker 3Dfx Interactive. Its 2011 acquisition of mobile communications equipment maker Icera, followed by compiler tech maker PGI in 2013, kicked off a decade in which NVIDIA used its resources not only to fill technology gaps, but also to enter new markets. By the end of the decade, NVIDIA had initiated more than a dozen acquisitions.
- Mobile computing. In 2011, NVIDIA released its first-generation Tegra—its mobile processor for smartphones, tablets, entertainment systems, and vehicle navigation. Tegra is a system-on-a-chip (SoC) series.
- Advanced vehicle technologies. In 2017 the company announced a partnership with automaker Toyota, which would use NVIDIA’s DRIVE PX artificial intelligence platform for its own self-driving cars. The NVIDIA DRIVE chip enables vehicles to analyze the surrounding environment via cameras, radar, and lidar technologies. NVIDIA also partnered with Baidu, a Chinese multinational technology conglomerate, which uses the DRIVE PX series in its self-driving car initiative.
- Metaverse. In 2020, NVIDIA released its beta version of Omniverse, which leveraged NVIDIA’s graphics leadership to develop 3D imaging, design, and engineering.
The 2020s: The AI renaissance, regulatory scrutiny, and the one that got away
Although corporate acquisitions are commonplace in the corporate landscape, NVIDIA’s dominant market position in the chip industry has placed it under the scope of antitrust watchdogs and regulators. For example, it was 2006 when NVIDIA received its first subpoena from the U.S. Department of Justice regarding possible antitrust violations.
Regulatory scrutiny of NVIDIA hit a fever pitch in 2020, however, after its attempted $40 billion purchase of Arm Ltd., which was then held by tech investing giant SoftBank. When combined with NVIDIA’s GPU dominance, Arm (whose chip technology powers hundreds of devices, including Apple iPhones and iPads, Amazon Kindles, and many automobile makes and models) met resistance by regulators across the globe. The deal was ultimately scrapped in 2022.
But it was also in 2022 that NVIDIA’s investment in artificial intelligence paid off. By focusing on processing speed, production speed, and by investing heavily in deep learning and AI applications, NVIDIA was able to not only expand on GPU capabilities but also contribute greatly to AI innovation. When word got out that OpenAI’s ChatGPT platform—which set off a global rush toward AI technology— was built upon 10,000 NVIDIA GPUs, rival platforms clamored for NVIDIA chips (and investors clamored for NVIDIA shares).
But the move would also trigger another round of regulatory oversight, not just because of NVIDIA’s dominance (as of 2023, NVIDIA claimed that 70% of the world’s fastest supercomputers worldwide are using its chips) but also because of uncertainty surrounding AI and its impacts on society, culture, and employment. In September 2023, for example, NVIDIA’s French offices were raided in a cloud computing antitrust inquiry. Regulatory bodies in the European Union, China, and other countries also initiated a close examination of NVIDIA’s practices and overall position in the AI industry.
The future of NVIDIA lies in its continued innovation in hardware and software solutions, the potentially transformative impact of artificial intelligence, and in using its dominant position in GPUs to help shape the landscape of emerging technologies.