Chip Giant Nvidia’s Success in the AI Boom

This article was last updated on August 24, 2023

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Nvidia, the Unstoppable Force in AI

In Silicon Valley, there is one company that everyone wants to get their hands on: Nvidia. The American chip giant has been delivering highly advanced computer graphics cards that can cost upwards of $10,000 each. In the past quarter, Nvidia announced record-breaking profits, with $6.2 billion – a tenfold increase from the same period the previous year.

This surge in profits can be attributed to the explosion of new applications in artificial intelligence (AI). Platforms like ChatGPT and Midjourney have opened the floodgates, allowing users to generate content and images in a matter of seconds. As a result, there is now a high demand for Nvidia’s graphics processing unit (GPU) chips, as they have become the go-to choice for training AI systems. Tech giants and start-ups alike are scrambling to stockpile these chips.

No Garage, but a Restaurant

Thirty years ago, Nvidia was founded in an unexpected location – not in a garage like many other Silicon Valley success stories, but in a humble American restaurant called Denny’s. The three engineers who started the company spent countless hours in this restaurant, making it their first makeshift headquarters.

The CEO and one of the founders of Nvidia, Jensen Huang, has been leading the company for all these years. Born in Taiwan and raised in the US, Huang is known for his signature black leather jacket. This fashion choice is reminiscent of other Silicon Valley icons like Steve Jobs and Mark Zuckerberg, known for their distinctive personal styles. Bloomberg describes Huang as a leader with disarming humor, but also as someone who can quickly become angry and use colorful language in the office.

Nvidia’s Journey in the AI Boom

Nvidia’s rise to prominence in the AI boom is a relatively recent development. The company initially focused on producing video cards for gamers, which generated significant revenue for many years. However, in a surprising turn of events, Nvidia sold more chips to data centers last year, particularly for AI applications. This shift in focus propelled the company’s revenue and solidified its position in the AI industry.

“About a decade ago, Nvidia realized that computer science students were using their chips to train AI systems,” says Chris Miller, author of Chip War, a book discussing the global chip industry. “This realization prompted Nvidia to heavily invest in AI, leading to the entire AI community adopting Nvidia chips and software.”

With a market capitalization of over 1 trillion dollars, Nvidia stands as one of the largest companies in the industry. It surpasses Taiwanese chip maker TSMC in value, despite TSMC being an essential manufacturing partner for Nvidia. While Nvidia develops chips, TSMC handles their production.

Geopolitical Challenges for Nvidia

Similar to Dutch company ASML, Nvidia finds itself entangled in the ongoing geopolitical power struggle between the US and China. “The US has made it clear that it doesn’t want the most advanced AI chips to be sold to China,” explains Chris Miller. In October of last year, new restrictions were announced, prohibiting Nvidia from selling its latest chips to China.

To navigate these limitations, Nvidia made modifications to one of its key chips, allowing it to still be sold in China. However, this workaround may be temporary, as the US government aims to ban the sale of this customized chip as well.