Let’s talk about a successful company that has gone through a thorny path from a small electronics designer to the largest semiconductor technology empire — the story of Nvidia is a success story and an exemplary gold mine for shareholders. How did it all start, what is the GPU revolution, why are video games not a priority at all, and how have cryptocurrencies and artificial intelligence affected the world? Let’s go through all these points, analyzing the history of a relatively young company and looking into the near future.
In 1993, Jensen Huang founded Nvidia, a semiconductor electronics company. The main specialization of the small company was the development of graphics accelerators. The home computer market was growing rapidly, so the demand for high-quality products was constantly growing. Despite serious competition, Nvidia managed to stay afloat and make good progress without a full cycle of its production.
Over the next few years, the company cooperated with other corporations. The partnership with SGS-Thomson allowed for mass production of a GUI accelerator with high profitability for the manufacturer. Over time, Diamond Edge 3D graphics cards (they were not yet called video cards) became more common, and leading game developers (Sega) created projects for Nvidia graphics accelerators.
In 1996, the familiar DirectX for Microsoft Windows operating systems appeared. At that time, few people were interested in 3D graphics because it was expensive and everything was quickly becoming outdated due to incredible progress. The company’s success was exponential – in the first quarter of 1997, it managed to sell 1 million Riva 128 processors.
More and more companies wanted to cooperate with Nvidia, and very soon the number 1 tech giant would have enough resources to take over other companies. In 1999, the first professional Nvidia Quadro graphics card was introduced, and its successors are still being produced today.
The acquisition of 3dfx was the beginning of Nvidia’s massive popularity among consumers. Back then, the home computer market was booming and everyone wanted a good PC at home. It was the perfect time for growth, and the tech mastodon took advantage of it.
The first 10 years of the third millennium can be considered the best conditions for the growth of computer component manufacturers. In an era when the Internet was not used to watch vertical videos and telephones were used only when necessary, home PCs felt like fish in water. The golden days of computers enriched Nvidia, giving it the opportunity to work in many directions.
Some divisions were involved in professional graphics cards, others in integrated solutions, and a great deal of attention was paid to video game enthusiasts on personal computers. The release of a graphics accelerator for the most breakthrough game console ever (Sony PS3) also made a significant contribution.
Nvidia grew faster than other semiconductor giants, so experts predicted a serious rise in share price in the next few years. They did not even realize that in 20 years, the value of Nvidia shares would grow 500+ times.
In 2006, the world saw the CUDA architecture for the first time, and 500 million GPUs have been sold since then. A few years later, users would face a serious increase in power consumption of video cards that would have to be powered with additional cables (older GPUs had only slot power). The GeForce line became a real hit, positioning itself as a solution for gaming PCs.
For a long time, the main source of revenue was gamers who regularly updated their gaming computers with new graphics cards. It would take at least 50 paragraphs to talk about every successful Nvidia GeForce video card, and all the failed products can be counted on one hand. The GTS and GTX series became really popular with the advent of the GTS and GTX series. Legendary graphics cards like the Nvidia GTX 285 laid the foundation for the development of powerful gaming PCs. It was one of the first mass-market dual-chip graphics cards, which later received strong successors.
Only a select few could boast of the notional GTX 690 at the time of its release because most computers were simply not physically ready for such high-power consumption. Along with the increase in TDP, the power of graphics accelerators grew, almost doubling with each new generation.
The Pascal generation released in 2016 is still considered the best by gamers. The tenth series of video cards gave a good performance boost and is still running in millions of computers around the world. For a long time, the competition with Radeon was approximately equal, and over the years, the gap has been growing in favor of Nvidia.
It has gotten to the point where it is almost impossible to buy a laptop with a discrete AMD Radeon graphics card in Ukraine, while Nvidia gaming graphics cards are used in 90% of gaming computers. This is confirmed by Steam statistics because it is not very correct to rely on bare sales, especially during the period of cryptocurrency mining and the rise of artificial intelligence.
The active development of mobile technologies made the company think about the market of portable electronics, so in 2008, the company announced its Nvidia Tegra processor. The company was unable to gain a foothold in the mobile phone segment, but agreed to cooperate with a game console manufacturer — Nvidia Tegra X1 is used in the most popular game console of today — Nintendo Switch.
The emergence of cryptocurrencies has changed the world, and for Nvidia, the emergence of Bitcoin has forced it to reconsider its plans for the near future. As it turned out, video cards can be used for heavy computing. With the advent of software that taught GPUs to work for the good of civilization (if that’s what you’d call it).
As cryptocurrencies grew rapidly, so did Nvidia shares. The company realized that mining was a much more promising business than retail sales of video cards for gamers. No sooner had the cryptocurrency fever ended than the «epidemic» artificial intelligence began.
In August 2023, NVIDIA reported its results for the second quarter of fiscal year 2024 and announced a doubling of revenue due to sales of chips for artificial intelligence. Over the past three months, the company has earned $13.6 billion, exceeding analysts’ expectations. It was also 170% ahead of last year’s results. Earlier, experts predicted revenue of $11.22 billion in the second quarter. NVIDIA’s GAAP net profit amounted to $6.18 billion compared to $656 million in the same period last year, a nine-fold increase.
Last quarter, the figure was $2.04 billion. The data center division was the most profitable. Its revenue amounted to $10.32 billion, up 141% quarter-on-quarter and 171% year-on-year. This division produces chips for AI. The former flagship gaming division is also growing. Its revenue in the second quarter amounted to $2.49 billion, which is 22% more than last year.
The developers of neural networks have made serious progress and their creations have begun to amaze the whole world. Nowadays, almost every major company focuses on AI, trying to attach this prefix to its products in some way. Smart assistants, image generators, interactive chats – all of this became possible thanks to well-trained neural network models.
Nvidia was making good money in the corporate segment even before the craze of artificial intelligence. Their supercomputers and servers have been used to process massive amounts of information for more than 10 years. In 2017, the VOLTA architecture laid the foundation for the development of modern AI, and a year later, the Turing architecture took cloud computing to a new level.
The consumer segment was no longer a priority because large companies were buying the most expensive equipment worth millions and billions of dollars, from which Nvidia received much more net income. Running after gamers and asking them to buy a new video card is not an option for such a large corporation when serious people offer huge amounts of money.
Nvidia can hardly be called a hardware-only manufacturer, as software is a major part of the solution. It’s no secret that Nvidia graphics cards (not only professional but also gaming ones) are much faster at rendering 3D graphics, have better compatibility with professional software, and are the undisputed favorite among workstation owners.
The company no longer cares about the eternal whining of video game lovers because all that gamers can give is a drop in the bucket compared to the corporate segment. A similar situation is observed in Intel and AMD, which earn more and more from server hardware and less and less from the consumer segment.
The source of Annual Reports indicates a rapid increase in profits in the corporate segment and a decline in the video game industry. It is no secret that until 2023, gaming graphics cards were mostly bought not for gaming but for cryptocurrency mining, so there is no need to be under the illusion that 2 years ago the company earned more from gamers.
Yes, Microsoft and Apple still have a larger capitalization, but the growth trend of the artificial intelligence market gives Nvidia every chance to take the first place, and for a long time and by a large margin. Other giants such as Intel and AMD are not even in this ranking — they cannot compete with the green mastodon.
In fact, gaming is no longer as profitable for the company as one might think, and data centers are purchasing more and more expensive equipment worth billions of dollars. This is why the shares have risen so rapidly, even after the end of the mass mining era.
Why focus on something that no longer makes sense? Of course, no one is going to close the home PC division because that’s where the company grew up, but gamers need to understand one important truth. We need to come to terms with one fact — Nvidia has outgrown the period when it made graphics cards primarily for interactive entertainment.
Now it is the largest «silicon» corporation of our time, which, with current technology trends, will only grow as antitrust committees and artificial intelligence regulators allow it. It will continue to produce gaming graphics cards honoring the audience, which will be a source of additional, small profits. Earnings in this segment are still sufficient to keep production going.
In conclusion, we leave you with a list of the 20 most popular consumer graphics cards of our time, which speaks for itself:
We express our gratitude to the company Nvidia for powerful video cards, innovative technologies, high-quality software and invaluable contribution to the development of technological progress and the entire civilization