Only seven American businesses have ever been valued at a trillion dollars. Some were retrieved from garages. Others began in college dorm rooms. Nvidia was born in a Denny’s restaurant.
The story of the world’s most valuable chip producer begins 30 years ago, when three engineers met in a Silicon Valley cafe, debating computing concepts and dreaming up the firm that would transform their lives over Grand Slam breakfasts.
“We were not good customers,” said Nvidia co-founder Chris Malachowsky this week. “We were going to show up for four hours and drink 10 cups of coffee.”
They were so horrible customers that they were ejected from their booth and relocated to a rear room of the restaurant. This Denny’s area was being used as a co-working space by two groups: the creators of Nvidia and the San Jose, Calif., police. “All of the cops are writing their reports,” Malachowsky explained. “We’re sitting there with our laptops, trying to figure out whatever it is we’re doing.”
Whatever they were doing turned out to be the creation of a corporation worth $1 trillion this week.
Since its inception, Nvidia has made early bets on markets that did not yet exist, ranging from PC gaming to AI computing. Jensen Huang, co-founder and CEO of Nvidia, refers to them as “$0 billion markets.” And every $1 trillion company began in a $0 billion market. The world’s wealthiest corporations have always been able to see around corners and picture a future that no one else can see, because the most lucrative prospects in any market are the ones that never seemed to be worth so much.
That is Nvidia’s history. It isn’t as well-known as Apple, Microsoft, Alphabet, Amazon, Meta, or Tesla. It has the appearance of someone falling asleep on a keyboard. However, its semiconductors are the unseen, vital engines that power the most enticing sectors of the economy. And the powerful graphics chips known as GPUs essential for artificial intelligence are nearly entirely manufactured by Nvidia, as if gold rush miners relied on a single business for picks and shovels.
Nvidia’s critical position in the AI boom has nearly tripled its market valuation in 2023, and the business gained $184 billion in one day of frantic trading last week. $184 billion dollars! Nvidia expanded by an entire Netflix in a matter of hours. It is now worth more than many of its competitors combined, thanks to record earnings that have investors ecstatic and Wall Street experts sounding like overeager teenagers. “Just WOW,” one person wrote.
To appreciate how Nvidia became the latest and most unlikely member of the $1 trillion club this week, consider a run-down cafe with red seats, neon lights, and gunshot holes in the windows.
The early days of any firm may disclose a lot about its culture for the rest of its life, and the organizational philosophy formed between gulps of restaurant coffee helps explain Nvidia’s success to this day.
I chatted with Malachowsky shortly after Nvidia’s market capitalization surpassed the trillion-dollar mark for the first time. He stated that there were numerous ways to connect what is happening now to what happened in the past. “One was that we discussed who we wanted to be,” he explained.
They intended to develop a better semiconductor and a new type of business around it. Malachowsky was in charge of hardware design. Curtis Priem was assigned to software architecture. Huang oversaw all corporate decisions. He did market research in Denny’s while they picked at their eggs, examining the competitors, the pricing of silicon, and the possible margins of their nameless company. “Jensen refused to join the startup unless it could make $50 million in sales in a year,” according to Priem. (He made the right decision: Nvidia’s revenue was $27 billion last year.)
Denny’s was essential to Huang, who has been operating Nvidia when Mark Zuckerberg was in elementary school, before it was the birthplace of his company.
It was a defining experience. Huang was a shy adolescent, but accepting pancake orders taught him how to speak with people and compromise in uncomfortable situations that were out of his control. He also learnt from one of his regulars that he should add mayo and mustard to the Super Bird, a turkey sandwich that is still his favorite item on the menu.
Before combining their complementing talents and going into business together, Huang, Malachowsky, and Priem had known each other for years. Priem and Malachowsky worked for Sun Microsystems, while Huang worked for LSI Logic, but they couldn’t meet in their offices since they were plotting their exits. “Neutral territory was this Denny’s,” Priem explained.
In 1992 and 1993, they met multiple times to discuss the specialized processors that would deliver more realistic, 3-D images to gaming. It’s where they started the company, but they left before it became Nvidia. When they observed the gunshot holes in the front glass, they recognized that a diner along the highway wasn’t the best place to work. “Perhaps this isn’t the safest place to hang out for hours and hours,” Malachhowsky sipped from a coffee mug through video chat.
When they moved to Priem’s townhouse, they enjoyed more privacy. What they lacked was air conditioning. Or a moniker.
One thing they did know was that they wanted to be in the chip industry. Graphics cards were identified by two letters at the time, and Priem loved the sound of “NV.” They named their company Nvision, which was not a genuine term and gave no indication of what they would do. It was ideal. Priem went to his kitchen answering machine to record a greeting from Nvision’s global headquarters. The only difficulty was that numerous companies with identical names already existed, including one that produced environmentally friendly toilet paper. Priem opened his Latin dictionary and looked for the word for envy. Invidia. He discarded the first letter and replaced it with a new message on his answering machine.
In the early years, they had to persuade many individuals, including Huang’s mother, of Nvidia’s goal. He recalls the advice Mom offered him when he declared that he was going to create a firm with his friends to develop chips for video games.
“Why don’t you go out and get a job?” She stated.
Over the next three decades, the entrepreneurs nearly had their lunch devoured multiple times. Nvidia was on the verge of bankruptcy just before releasing the graphics processing unit that would save the company in 1997. When it introduced a new platform for accelerated computing in 2007, the technology was ahead of its time, and the company’s profitability suffered as a result.
However, the wager paid off in the long term. Huang’s personal fortune increased by $6 billion in a single day last week as a result of his company’s approach throughout those tough years.
The bold move to invest in AI computing before they knew chatbots would be trained on thousands of Nvidia’s pricey chips was similar to Huang, Malachowsky, and Priem quitting their jobs to establish a startup.
It is evident today, but it was not at the time. When I asked Malachowsky about the GPU market back then, he said, “There was none.” It was one of Huang’s enchanted $0 billion marketplaces, which he used to define AI in an ingeniously timed graduating speech last week.
He made no mention of Denny’s. When he encouraged the college grads to remember one thing as they obtain jobs, start businesses, and hunt for their own $0 billion markets, it was difficult not to think of Super Bird sandwiches with mayo and mustard.
“You’re either running for food or running away from becoming food,” he explained.
