The Rise of Nvidia: From Graphics to AI Powerhouse

Over the past two decades, Nvidia (NVDA) has skyrocketed into global conversation. The semiconductor company is considered an international leader in the design and manufacturing of computer chips and has played a pivotal role in revolutionizing the rise of artificial intelligence (AI). Beyond its strengths in the gaming, data, and AI fields, Nvidia announced plans this March for a quantum research center in Boston, where CEO Jensen Huang stated that researchers could tackle problems ranging from drug discovery to materials development. Here’s a look at Nvidia’s path to where it is today, from creating hardware for the gaming industry to designing the chips that power AI.

The Early Days: Founding and Initial Struggles

On April 5, 1993, Jensen Huang, Chris Malachowsky, and Curtis Priem founded Nvidia with an initial focus on designing and producing 3D graphics processors for computing and video games. The company’s first product release, the multimedia processor NV1, didn’t receive the reception the founders were hoping for. This led to a financial situation so dire that Nvidia laid off half its staff, adopting the unofficial motto: “Our company is 30 days from going out of business.”

Adding to the pressure, a partnership with Japanese video game company Sega to produce console graphics chips fell through. However, Sega invested $5 million in Nvidia, a lifeline that allowed the company to survive its early struggles.

Turning Point: The RIVA Series

Despite financial challenges and a smaller team, Nvidia released its next chip in 1997, the RIVA 128. This chip was a success, supporting high-resolution 2D and 3D graphics, with over a million units sold in its first four months. Building on this foundation, Nvidia produced the RIVA TNT, which further solidified its place in the industry with improved image quality and performance.

On January 22, 1999, Nvidia went public on the New York Stock Exchange (NYSE) at $12 a share. By May, it had shipped its 10,000,000th graphics processor. Later that year, Nvidia released the GeForce 256, marketing it as the world’s first “Graphics Processing Unit” (GPU). This innovation allowed for parallel processing, enabling devices to handle multiple tasks simultaneously, resulting in smoother and more realistic graphics.

Expanding Horizons: CUDA and AI

Finding growing success in supplying GPUs to both customers and consoles like Xbox, Nvidia joined the Nasdaq 100 and the S&P 500 in 2001. In 2006, Nvidia launched CUDA, a platform that allowed users to access their GPUs’ parallel processing capabilities for their own software, not just graphics. Between 2006 and 2017, Nvidia invested nearly $12 billion in research and development, with a significant portion directed toward CUDA.

Initially, CUDA downloads slowed entering the 2010s, and while it provided users with the ability to use chips for purposes beyond gaming, it didn’t seem to pay off for investors. However, technological advancements would soon make CUDA crucial to Nvidia’s future.

In 2012, students Alex Krizhevsky and Ilya Sutskever used CUDA to train the visual-recognition neural network AlexNet with two Nvidia GPUs. This breakthrough demonstrated that GPUs could significantly reduce training times for machine learning models compared to traditional CPUs.

The AI Pivot: A New Era

Following the success of AlexNet, Nvidia began pivoting its focus toward artificial intelligence, supported by its revenue from gaming. By 2016, it announced the DGX-1, a system designed specifically for deep learning and large language models. That year, Nvidia’s stock nearly tripled in price, with CEO Jensen Huang stating, “It’s ‘destiny meets serendipity.’ People think it’s an overnight success, but like most overnight successes, it took us years.”

During this time, Nvidia made strategic acquisitions, including wireless company Icera in 2011 and hardware company The Portland Group in 2013. Although an attempt to acquire semiconductor and design company Arm in 2020 fell through due to regulatory concerns, Nvidia continued to innovate.

In March 2022, Nvidia announced the H100 “Hopper” chip, which promised faster training and better performance for artificial intelligence. Major companies, including Alphabet, Amazon, and Microsoft, turned to Nvidia with billions as they began developing AI and data-driven products.

The ChatGPT Phenomenon

One significant partnership was with OpenAI, which dates back to 2016 when Nvidia donated the first DGX-1 supercomputer to the startup. In November 2022, OpenAI launched ChatGPT, a language model built on Nvidia GPUs that quickly made headlines. Within two months, ChatGPT set the record for the fastest-growing consumer application in history, reaching 100 million monthly active users by January 2023.

“A new computing era has begun,” Nvidia CEO Jensen Huang stated in a 2023 announcement. “Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI.” With increasing investor interest in artificial intelligence and the growing demand for GPUs, Nvidia’s revenue for the quarter ending in January 2024 more than doubled year over year.

Record-Breaking Growth

Following the release of its quarterly report, Nvidia experienced the largest one-day gain in stock market history, adding $277 billion in value. The company reached a valuation of $2 trillion the following day, a record that wouldn’t stand long as Nvidia surpassed it again just two months later. In March, Nvidia announced its next chip, Blackwell, designed for higher performance with reduced cost and energy consumption.

In June 2024, Nvidia executed a 10-for-1 stock split, subsequently passing Microsoft and Apple to become the world’s most valuable company at $3.3 trillion. By November 2024, it was added to the Dow Jones Industrial Average.

Challenges Along the Way

Despite its successes, Nvidia faced challenges throughout its rise. In 2018, the company encountered a class-action lawsuit alleging it failed to disclose the impact of the cryptocurrency market on GPU sales. The popularity of Nvidia GPUs among cryptocurrency miners led to significant revenue fluctuations. Nvidia paid a $5.5 million settlement in 2022, and the Supreme Court dismissed its appeal in December 2024, allowing the 2018 case to proceed.

Legal issues were not new for Nvidia; in 2016, it settled a case regarding the marketed performance of its GTX 970, resulting in payouts of $30 per purchase. Additionally, Nvidia faced challenges in keeping up with demand amid a global chip shortage that began in early 2020, exacerbated by the COVID-19 pandemic and geopolitical tensions.

Looking Ahead: The Future of Nvidia

As of December 2024, a report from the IDC projected global demand for AI and high-performance computing (HPC) to grow by over 15% in 2025. In January 2025, President Trump announced Project Stargate, involving tech companies investing $500 billion in AI infrastructure in the U.S. over the next four years. Nvidia, as a technology partner, saw its stock jump, reaching a $3.6 trillion market cap.

However, challenges persisted. Later that month, the Chinese company DeepSeek released its own AI model, reportedly trained at a significantly lower cost than competitors, causing Nvidia stock to drop $589 billion in a single day—marking the largest single-day loss in stock market history.

In March 2025, Nvidia debuted its Blackwell Ultra chip, boasting 1.5 times the performance of its predecessor. In April, the U.S. government banned the export of Nvidia’s H20 chip to China, predicting an $8 billion loss in potential sales.

Despite these hurdles, Nvidia continues to grow, briefly surpassing Microsoft again in June as the world’s most valuable company. Looking forward, some analysts speculate that Nvidia could be the first company to hit a $4 trillion market cap. As ARK Invest founder Cathie Wood noted, “[Nvidia] really got the AI revolution going, and we think it’s still going to play a mighty role.”