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How NVIDIA momentarily became the most valuable company in the world


A couple weeks ago, NVIDIA became the most valuable company in the world. Darian Woods and Wailin Wong, our colleagues over at the Indicator from Planet Money, explore how the tech company got here.

DARIAN WOODS, BYLINE: NVIDIA is often called a chipmaker, and that's a bit of an oversimplification. First of all, NVIDIA doesn't actually manufacture the semiconductor chips. NVIDIA does the designing, like where the circuits all go on the chip. It also makes the software so that developers can work with those chips.

WAILIN WONG, BYLINE: This combination has its roots in 1992. Jensen Huang and two other engineer friends met at a Denny's restaurant in San Jose. Their idea was to improve video games by building specialized chips for rendering 3D graphics.

WOODS: One person who's spent a lot of time unearthing NVIDIA's history is David Rosenthal. David is one-half of the tech podcast "Acquired," which made this epic series of podcasts on the company's history.

DAVID ROSENTHAL: NVIDIA corporate communications got in touch and said, who were your sources? We just - we watched a lot of YouTube videos with Jensen. We read a lot of papers.

WONG: David says, the way that Jensen is involved in the details is one key to why NVIDIA rode the AI wave so astutely.

ROSENTHAL: He started moving the NVIDIA ship in the direction that it is today with AI and machine learning, starting in - like, 20 years ago.

WONG: At this time, NVIDIA was mainly known by 15-year-olds upgrading their gaming computers. But in the early 2000s, Jensen essentially made a huge bet on selling supercomputing power to a wider range of people. And as part of this, the company launched a software development framework called CUDA. CUDA acts kind of like a middleman between the software developer and the chip, and the system would be crucial for AI after a turning point in 2012.

WOODS: It was at this annual competition for researchers to submit AI systems that could recognize images from a massive database.

ROSENTHAL: It blows away the rest of the field.

WONG: Standard approach had been to train these models using central processing units, or CPUs, but these calculate their instructions sequentially. So instead, this team ran these training calculations using graphics processing units, GPUs.

ROSENTHAL: A graphics card handles tens of thousands of instructions at a time.

WOODS: And who makes graphics cards? NVIDIA, of course.

WONG: Big social media companies realized they could train software to notice patterns in what kind of pictures and posts and movies people like on the Internet.

ROSENTHAL: That was billions and billions and billions of dollars of profits.

WONG: It's where NVIDIA suddenly started its journey becoming one of the most valuable companies on the planet.

WOODS: In the parlance of tech investing, NVIDIA has this giant moat. David reckons it's protected from competition in the foreseeable future because of CUDA, that development system.

WONG: Millions of other developers use CUDA. So if you're a college student, that's the language you're going to learn. It's a self-reinforcing cycle.

WOODS: NVIDIA is standing on top of the world right now. Though, even with all its chip sales, its stock price is very highly priced by conventional measures. One misstep, and there is a long way to fall.

WONG: Wailin Wong.

WOODS: Darian Woods, NPR News.

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Darian Woods is a reporter and producer for The Indicator from Planet Money. He blends economics, journalism, and an ear for audio to tell stories that explain the global economy. He's reported on the time the world got together and solved a climate crisis, vaccine intellectual property explained through cake baking, and how Kit Kat bars reveal hidden economic forces.
Wailin Wong
Wailin Wong is a long-time business and economics journalist who's reported from a Chilean mountaintop, an embalming fluid factory and lots of places in between. She is a host of The Indicator from Planet Money. Previously, she launched and co-hosted two branded podcasts for a software company and covered tech and startups for the Chicago Tribune. Wailin started her career as a correspondent for Dow Jones Newswires in Buenos Aires. In her spare time, she plays violin in one of the oldest community orchestras in the U.S.