Meet The $757 Billion Shadow Company - YouTube

Do you know what the 8th largest company in the world is?

You may not be able to guess it off the top of your head, but you could be pretty sure

that regardless of which company it is, the brand is probably ubiquitous.

Something like Facebook or JPMorgan Chase or Alibaba.

But, what if I told you that the 8th largest company in the word is actually Nvidia.

Now, we all know that Nvidia is a large company, but no way they’re the 8th largest in the

world.

Don’t they serve a super niche demographic 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 Nvidia that despite only pulling in $21.89 billion in revenue, Nvidia is valued

at upwards of a trillion dollars at $757 billion making them 8th largest company in the world.

To put that in perspective, if Apple was valued like Nvidia, Apple would be worth $12.65 trillion.

If Apple had such fat profit margins, the media would be all over it, but with Nvidia,

they don’t bat an eye.

So, here’s how Jensen Huang created a $757 billion cash cow that lurks in the shadows.

JENSEN HUANG Taking a look back, Jensen Huang was born

on February 17, 1963 in Tainan City, Taiwan.

Jensen spent many of his early years in Taiwan, but when he turned 9 years old, his family

would immigrate to Kentucky.

In Kentucky, Jensen and his brother attended a Baptist boarding school called Oneida Baptist

institute.

But, this didn’t last that long as his family would move to Oregon and Jensen would end

up attending Aloha high school.

From a very young age, Jensen was quite an overachiever and his specialties were academics

and table tennis.

When he was 15 years old, he placed third in junior doubles at the US table tennis open

championship.

Anyway, Jensen graduated in 1980 and he would find himself at Oregan state university where

he majored in electrical engineering.

At Oregon state, Jensen’s lab partner was a woman named Lori, and these two would eventually

get married.

After graduating in 1984, Jensen would score a job at a young startup called LSI Logic.

The company was just founded 3 years before his graduation, so Jensen was able to secure

a high level position as director straight out of college.

He didn’t stick around for long though as he would jump to AMD and become a microprocessor

designer.

At this point, an outsider would think that Jenson was killing it, and objectively he

was.

He had a solid job at AMD and he was presumably building his relationship with Lori.

Jensen was clearly way ahead of the average broke college graduate, but Jensen wasn’t

actually that happy.

Jensen was having some sort of early life crisis in his late 20s, and he longed to do

something that was much bigger.

He suppressed this feeling throughout most of his 20s, but eventually he gave in and

took the plunge.

In 1990, Jensen returned to school to get his masters in electrical engineering from

Stanford.

And after graduation, he co-founded a startup with Curtis Priem and Chris Malachowsky.

NV The trio had no clue what to name the company

or how exactly they were going to fund development, but one thing they were sure of from the very

beginning was 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 the problem was that these three weren’t the

only ones trying to capitalize on this upcoming boom.

By 1994, there were already over two dozen graphics card companies and this number would

balloon to over 70 by 1997.

Despite the significant competition, one of the best and worst parts of the semiconductor

industry is that brand value doesn’t mean all that much.

Unlike Apple and Microsoft who can afford to be complacent for years and sometimes even

decades, being complacent in the semiconductor industry results in a pretty quick demotion

from number 1 regardless of how established you are.

I mean just take a look at Intel.

They’re getting obliterated by AMD, and they haven’t set an all time high in 21

years.

On the brightside, this meant that Jensen could easily break into the market if he created

a superior product.

The problem though is that it’s not actually that easy to create said product especially

when you only have $40,000.

Despite the difficulty and low budget, the trio got to work on iterating through gpus

which they called NV.

NV simply stood for next version, and it wasn’t until they incorporated the company that they

came up with a name for the company itself.

Given that they were naming all of their prototypes NV, they felt that it was only fitting to

find a name that started with NV for the company.

They never found such a word, but they did find the Latin word “invidia” which translates

to envy.

They simply dropped the i and that’s how Nvidia was born.

Anyway, about a year after founding the company and many years of working on the product,

the trio was ready to launch their first product.

In 1994, Nvidia formed a partnership with electronic manufacturer SGS Thompson and Diamond

Multimedia Systems to produce the NV1.

SGS was tasked with manufacturing the chip itself and Diamond Multimedia was tasked with

installing the chips onto multimedia accelerator boards.

The NV1 would launch in 1995 as the Diamond Edge 3D, and 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, but their biggest release by far was in 1999.

In 1999, Nvidia launched the GeForce 256 which they like to call the world’s first GPU.

This doesn’t really mean much though given that they invented the term themselves.

Nvidia defined GPU as a single chip processor that could process a minimum of 10 million

polygons per second.

To put that in perspective, modern GPUs are able process 7 billion polygons per second.

So, there was still a long way to go, 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 dotcom crash was rolling

around.

Nvidia was founded right before the dotcom bubble really started to pick up steam, so

they’re rise up was like a rocketship.

But, now it was time to see if Nvidia could reach orbit or if they would crash back to

Earth.

The dotcom crash didn’t initially impact Nvidia as they were more of a background player

as opposed to a consumer brand.

In fact, Nvidia was named the fastest growing company in America in 2002.

Ironically, Nvidia would get crushed that same year.

Within just 12 months, Nvidia would crash 90% and nearly return to IPO levels.

To make things worse, Curtis Priem would retire from Nvidia the following year, so it was

up to Jensen and Chris to lead the company through the wreckage.

Jensen started off by acquiring some discounted companies including 3dfx and mediaQ.

But, Nvidia’s biggest development during this time was no doubt SLI.

Nowadays, SLI is mostly a joke and there’s very little use for it, but back in 2004,

this was a game changer.

SLI or Scalable Link Interface allowed for multiple GPUS to work together and produce

a singular output.

If you had two GPUS in SLI, each GPU would render alternating frames, so the workload

of each GPU was cut in half.

Now, this didn’t mean that the system was twice as powerful as a single GPU, but it

was a substantial improvement.

Also, this invention resulted in gaming enthusiasts to buy multiple GPUS each time they built

a PC, so it was quite lucrative.

Aside from SLI, Nvidia also formed a handful of strategic partnerships.

In 2004, Nvidia formed a partnership with NASA where they helped NASA reconstruct the

terrain of Mars using Nvidia GPUS.

That same year, Nvidia would also team up with Blizzard Entertainment to create 3d graphics

for World of Warcraft.

Nvidia followed up these great partnerships with the nail in the coffin which was a partnership

with Sony on the PS3 in 2005.

With all of these acquisitions, partnerships, and SLI, Nvidia was able to survive the dotcom

crash.

Remember how there were 70 companies in 1997 targeting the GPU market?

Well, by 2006, Nvidia was the only independent GPU company that was still standing.

It seemed like it was just blue skies ahead, and Forbes would name Nvidia as the company

of the year in 2007.

And then the 2008 financial crisis rolled around.

I don’t know what it is but these publications are perfect at calling the top.

After Fortune named Nvidia the fastest growing company of the year in 2002, Nvidia crashed

90%.

After Forbes named Nvidia the company of the year, 2008 happened.

Fortunately though, 2008 wasn’t nearly as bad as the dotcom crash for Nvidia.

In terms of stock price, Nvidia crashed 85%, but fundamentally the company was much stronger.

The company did have a couple of negative quarters, but they were back up on their feet

by 2010, and that brings us into modern day Nvidia.

MODERN DAY NVIDIA Throughout the first half of the 2010s, Nvidia

was more or less stagnant.

Their revenue and profits didn’t change all that much, and the company wasn’t really

growing.

This wasn’t really their fault though as they had simply reached market saturation,

and they needed the market itself to grow larger before they could grow again.

Fortunately for Nvidia, the market would not only grow but it would explode in 2016 and

17 due to cryptocurrencies.

As y'all probably know, Bitcoin made a mad dash to $20,000 and took all the altcoins

with it to the moon in 2017.

And 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.

Double, triple, quadruple the price, miners didn’t care.

They were making thousands if not tens of thousands from their mining rigs, and paying

a premium to get a GPU was not a problem.

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 a quarter

to $1.2 billion per quarter, but this was just the beginning.

Given that Nvidia had reached market saturation with gamers, Jensen was shifting his 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 that titan and quadro that appealed to

institutional buyers.

Just as bitcoin was blowing up and their expansion efforts were paying off, AMD was resurrecting

the stagnant PC gaming community.

The launch of Ryzen CPUS made PCs much more affordable which attracted a lot of console

gamers.

By the end of 2018 and throughout 2019 though, the effects of these catalysts were starting

to wear off, but then 2020 and the supply shortage hit, and Nvidia was sent on another

rocketship and they haven’t gotten off yet.

CONCLUSION: Today, Jensen stands at $27.9 billion which

makes him part of the top 100 richest people in the world.

Looking forward, it’s not clear how much more Nvidia can grow in the imminent future

as they’ve already ballooned 129% over the past year.

But as long as Jensen is CEO, I think it’s just a matter of time until Nvidia recovers

from the next setback and becomes a trillion company.

And then, Nvidia will be the trillion dollar shadow company.

Do you guys own an Nvidia GPU?

Comment that down below.

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