How Nvidia won the AI race and defeated all others

Only four corporations globally boast a valuation exceeding $2 trillion: Apple, Microsoft, the oil titan Saudi Aramco, and, as of 2024, Nvidia. You might not immediately recognize the name Nvidia, and that’s understandable. Unlike Apple, which produces ubiquitous handheld devices, Nvidia operates behind the scenes, designing chips nestled deep within computer systems—a seemingly niche product that has become increasingly indispensable.

If we rewind to 2019, Nvidia’s market value hovered around $100 billion. Its meteoric rise to over 20 times that size owes much to the AI frenzy. Nvidia stands as a major beneficiary of the AI boom, with its market dominance overshadowing even giants like OpenAI, valued at around $80 billion, and the global AI market, which surpassed $200 billion in 2023. The company’s ascent prompts questions about its ability to maintain its lofty position, but understanding how Nvidia reached these heights provides insights into its journey.

From its origins in 1993, Nvidia initially focused on a burgeoning sector of personal computing: video games. Founded by three Silicon Valley electrical engineers, the company specialized in designing graphics cards—also known as GPUs—that facilitate the rendering of intricate 3D visuals crucial for gaming and other multimedia tasks. While gaming remained its primary focus for years, Nvidia recognized the importance of diversification.

Expanding beyond gaming, Nvidia ventured into various domains, not all of which yielded success. However, one pivotal move in 2006 proved transformative. The introduction of CUDA, a programming language that unlocked the potential of Nvidia’s GPUs for general computing tasks, marked a significant turning point. These chips, originally designed for gaming, demonstrated remarkable versatility, particularly in computation-heavy fields like machine learning and crypto mining.

Nvidia’s evolution is particularly remarkable given the dominance of chip-making behemoth Intel in Silicon Valley. While Intel’s influence has waned due to strategic missteps, Nvidia capitalized on emerging trends, positioning itself as a frontrunner in accelerated computing. Today, Nvidia’s core markets span gaming, professional visualization, data centers, and the automotive industry, with its chips playing a crucial role in powering self-driving technology.

The COVID-19 pandemic further propelled Nvidia’s growth, with increased demand for computer components driving up revenues across gaming and data center segments. Notably, the surge in data center revenue underscored the burgeoning importance of AI applications, eclipsing gaming revenue—a testament to the rapid expansion of the AI landscape.

Nvidia’s products have permeated various facets of daily life, from gaming consoles to laptops, and its influence extends to emerging technologies like autonomous vehicles and cloud computing. However, the company’s success has also raised concerns about monopolistic practices and pricing power, with regulators scrutinizing its market dominance and thwarting attempts to acquire key players like Arm Limited.

The future of Nvidia hinges on the sustained momentum of AI innovation and its ability to navigate evolving technological landscapes. While challenges loom, including intensifying competition and potential limitations in microchip advancements, Nvidia’s pivotal role in shaping the AI landscape positions it as a formidable force in the tech industry, poised to leave an indelible mark on future generations.